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Overpaying during a fixed term

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Hi, I’m only a couple of months into a 5 yr fixed term on my mortgage and I’ve had an insurance payout that means Im in a position to overpay by 10% penalty free for the full length of the fixed term which I would do by direct debit.

Is there a benefit to doing that during a fixed term? I phoned my lender and asked them how much I could expect to knock off my term and they said they wouldn’t be able to calculate that until the end of my fixed term in 5 years time.

Is that right? I felt like they were fobbing me off/ trying to discourage me from doing it.
It’s something I’m interested in doing but only if I’m going to see a worthwhile benefit.

Comments

  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Forget the term that just determines the minimum contractual payment.

    The real term is determined by the actual payments made.

    The more and sooner you pay the cheaper the mortgage will be and get paid off.

    Check you are not better off with a savings account or putting more into a pension.

    You need to check if they will let you keep the same payment if you pay off the full 10% some lenders don't.

    The calculations are relatively easy but the lender won't have a tool to do it so you will have to do it yourself.

    As an example £100k @ 3% 25years £473pm after 5 years you would have £85,505 left to pay over 20 years

    Paying 10% at the beginning of each year and recalculating the payment(down).

    After 5 years you have £50,500 over 20 years £280pm

    or if you up the payment back to £473pm 10 years 5 months
  • kwame41
    kwame41 Posts: 168 Forumite
    Absolutely worth overpaying within the limits of your deal per year.


    With the caviats from getmore4less of course.


    Who is the morgage with?
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