How/when do you overpay?

Zola.

pavlovs_dog wrote: »

When we took on our mortgage as FTBs 9 years we took a similar approach, rounding our contractual payment up to a round figure. We got used to budgeting around that. As the debt reduced, we kept our contractual payment the same, effectively giving us 'free' OPs as it was money we had learnt not to miss. We have topped this up with additional spare money when we have been able.

We kept our mortgage term the same, so that if/when we decide to have children we have the option of dropping our mortgage payment down to our contractual obligation, thus enabling us to afford for me to have a longer maternity leave.

When you first start OPing, it feels like a drop in the ocean. It is very motivating to have small, achievable targets to work towards (celebrating a new 10K bracket or the fall of daily interest for example). Those small payments do add up. At the start of our mortgage debt our capital was reducing by about £300 each month. Now it goes down by more than £700 a time. The amount leaving our back account each month has barely changed in the 9 years.

Slow and steady wins the race!

How do you work out how much of the capital interest is chipped away as the years roll on and it becomes more powerful?

Zola.

FTBlalala wrote: »

Slow and steady definitely the way to go, we've been home owners for almost 7 months now and have been overpaying at least something every month. We have a similar plan to move to a more long term home in 5 years or so (we currently have a 2 bed maisonette but would like a 3 bed house eventually). So we have been upping our game every month to build as much equity as we can.

The best tip I ever received was to keep the current mortgage balance outstanding always at 00.00. So every month we have random OP's like this month £203.43 so we're now at £212,900.00.

At the beginning this was just £24.20, £57.54, £127.21 for example. The more the bills settled down the more we could commit to OP'ing.

Not sure I follow? Your current balance is the amount of debt owed now? If it was 0.0 we wouldnt be discussing repayment strategies

Barny1979

Zola. wrote: »

Not sure I follow? Your current balance is the amount of debt owed now? If it was 0.0 we wouldnt be discussing repayment strategies

Rounded down to an amount ending in zero.

FTBlalala

OOOOPPPPPPSSS!!!! My bad!

Sorry, to be clear the end of the balance should always have 00.00 at the end. Thanks Barny for clarifying.

E.g Jan 19 mortgage balance outanding £212,900.00

pavlovs_dog

Zola. wrote: »

How do you work out how much of the capital interest is chipped away as the years roll on and it becomes more powerful?

At its most basic, your mortgage statement will show the addition of interest each month. You subtract this from your contractual payment to work out the capital reduction.

Another option is to work out your daily interest, which you can then multiply by 30 or 31 to figure out your interest charge for that month. To do this take the outstanding amount of your mortgage, say £100.000 and divide this by 100 (to get one percent) and then multiply this figure by your interest rate, say 4.99. This gives you the interest you pay for a full year...to get the amount per day simply divide by 365 (days in year)

Below is an example:

100,000 / 100 = 1000

1000 x 4.99 = £4999 ( yearly interest)

4999 / 365 = £13.69 per day

(example originally posted by wantabetterlife)

In the first year, our interest was £14.96 a day. 8 and a half years later it is £5.82

Zola.

Excellent, good to know cheers!

DD265

FTBlalala wrote: »

The best tip I ever received was to keep the current mortgage balance outstanding always at 00.00 *edited* at the end. So every month we have random OP's like this month £203.43 so we're now at £212,900.00 for example.

I love that idea, round numbers are awesome.

pavlovs_dog wrote: »

In the first year, our interest was £14.96 a day. 8 and a half years later it is £5.82

I don't like those numbers though! It's definitely an incentive to make over payments.

ETA - I've just worked out that before we make the first payment on our mortgage, the daily interest charge will be £18.90! :eek:

pavlovs_dog

DD265 wrote: »

I've just worked out that before we make the first payment on our mortgage, the daily interest charge will be £18.90! :eek:

It also puts spending into a different context - is it worth X number of days of mortgage interest or could you make a wiser choice?

getmore4less

Zola. wrote: »

How do you work out how much of the capital interest is chipped away as the years roll on and it becomes more powerful?

Read up on amortisation.

Spreadsheet have the functions built-in if you want to do a custom forecast.

Or play with with one of the calculators

https://www.whatsthecost.co.uk.

Mortgage_Minimiser

DD265 wrote: »

I love that idea, round numbers are awesome.

ETA - I've just worked out that before we make the first payment on our mortgage, the daily interest charge will be £18.90! :eek:

When I started in Feb 2015, my interest was £17.29 per day. Today it is £10.32. Once you start OPing it moves downwards quickly.

Keep at it!

MM
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