Help and Guidance

EssexHebridean

There should be something in there somewhere - alternatively have a look at their website - I found THIS to start you off. When making OP's, you need to clearly state that the overpayment is to be taken off the capital balance outstanding, NOT taken to reduce the term (If I remember correctly), and that you wish your contractual monthly payment to remain unchanged. Another way of overpaying is to simply increase the amount you pay each month, if you have a set amount monthly that you want to throw at it. This is obviously easier than having to remember to call up to make the OP, if you lender allows it, and you can always call up with extra OP's, within your limit, if you want to.

getmore4less

confusedftb wrote: »

WestBrom BS.. was recommended this by lender because our jobs are not full-time permanent but we have been in the same jobs for over 4 years.

i did not see the early repayment in the mortgage documents i got, maybe i will have to read more thoroughly.

had to dig a bit but found this for the 5y 1.99% 80%LTV deal which should be in your T&C.

Early Repayment Charges

5% of amount repaid until 31/01/2021, followed by 4% of amount repaid until 31/01/2022, followed by 3% of amount repaid until 31/01/2023, followed by 2% of amount repaid until 31/01/2024, followed by 1% of amount repaid until 31/01/2025 plus interest to the date of redemption. Following the above period, interest will be charged to the date of redemption. You can make overpayments below £1,000 each calendar month without incurring early repayment charges.

Look like they are a fixed amount and not a % of outstanding balance.

EssexHebridean

That's superb if it is the case on the OP's deal specifically GM4L - well found!

getmore4less

EssexHebridean wrote: »

That's superb if it is the case on the OP's deal specifically GM4L - well found!

10% would be closer to £2k per month than £1k per month

confusedftb

getmore4less wrote: »

As a very rough number you need 20-25 times your spends in saving to fund retirement.

If you spend £10k a year that's £200k-£250k in some form or another, state pension will cover some of that but that kicks in a lot later these days.

The advantage of the pension wrapper is you get tax relief on the money going in and pay tax on the money coming out which in most cases is less than you would have paid if you kept the money and invested.

For a 40% tax payer the numbers stack up far better than paying of a mortgage and for the 20% taxpayer they are still very favourable.

When you factor in compounding growth and inflation reducing debt saving for the future over paying down a mortgage wins.

Probably worth reviewing your fear of pensions by some reading up.

one of the reasons why i opted out of the pension was to save up as much as i could for the deposit. Another reason was that i thought it will be better to start saving in pensions when i reach the age of 40. It is only now, after getting a mortgage i have started to think a lot about finances. My focus was on just saving whatever i was earning to save up the deposit.
you are right, i will have to read more on pensions.

getmore4less wrote: »

10% would be closer to £2k per month than £1k per month

thanks for this. i am going to find out more about this, will ring them up today, or maybe e-mail to get it in writing.:T

confusedftb

so, spoke to the lender and was told that i can only pay £999.99 per calendar month.
any more and the early repayment will be charged.

if i start paying £999.99 per month, how will it work? will it lower the number of years or will it lower the interest period? how does it work, sorry if it sounds silly but i find it difficult to understand

getmore4less

confusedftb wrote: »

so, spoke to the lender and was told that i can only pay £999.99 per calendar month.
any more and the early repayment will be charged.

if i start paying £999.99 per month, how will it work? will it lower the number of years or will it lower the interest period? how does it work, sorry if it sounds silly but i find it difficult to understand

As long as payments are credited and interest is calculated daily it makes little difference unless they recalculate the payment and even then the difference is small over the fixed term.

The contractual term just sets the min payment what you pay determines the actual costs.

confusedftb

getmore4less wrote: »

As long as payments are credited and interest is calculated daily it makes little difference unless they recalculate the payment and even then the difference is small over the fixed term.

The contractual term just sets the min payment what you pay determines the actual costs.

I still don't get it. :sad:

Are these things so difficult to understand or maybe its so much to absorb that i am finding it difficult.

So, what it means is that even if i pay £999.99 per month, it will not affect the interest rate of 2% for the 5 years. however i will still be reducing the borrowed amount (£224k)

once the 5 year period is over and i am on SVR then the overpayments will make a difference?

leading to a question, when will the overpayments make a difference? and on what? capital and total repayment amount or just interest?

getmore4less

confusedftb wrote: »

I still don't get it. :sad:

Are these things so difficult to understand or maybe its so much to absorb that i am finding it difficult.

So, what it means is that even if i pay £999.99 per month, it will not affect the interest rate of 2% for the 5 years. however i will still be reducing the borrowed amount (£224k)

once the 5 year period is over and i am on SVR then the overpayments will make a difference?

leading to a question, when will the overpayments make a difference? and on what? capital and total repayment amount or just interest?

The rate does not change during the fixed period
The interest is based on what you borrow
borrow less(overpay) you pay less interest the next day(if daily interest).

It is that simple.
Applying the payment to shorten the term or lower the payment makes little difference to the savings made.


overpay £1,000 and the rate is 2% you pay £20 less over the next year about £1.66pm

if they change the payment it won't change the same because of the way amortization works and the capital is spread over the years.

have a play with
http://www.whatsthecost.com/mortgage.aspx

on your mortgage £224k 1.99% over 25 years

£224k 1.99% £948.34pm
overpay £1k
£223k 1.99% £944.11pm

confusedftb

getmore4less wrote: »

The rate does not change during the fixed period
The interest is based on what you borrow
borrow less(overpay) you pay less interest the next day(if daily interest).

It is that simple.
Applying the payment to shorten the term or lower the payment makes little difference to the savings made.


overpay £1,000 and the rate is 2% you pay £20 less over the next year about £1.66pm

if they change the payment it won't change the same because of the way amortization works and the capital is spread over the years.

have a play with
http://www.whatsthecost.com/mortgage.aspx

on your mortgage £224k 1.99% over 25 years

£224k 1.99% £948.34pm
overpay £1k
£223k 1.99% £944.11pm

thank you for this.

So the overypayment will not help in the fixed 5 years because the interest is fixed at 2% on the borrowed amount.

however after the fixed 5 years, the overpayments will help and the interest will be reduced?
is my understanding correct?

thanks for the calculator, however given the situation i am in, i am working on a calculator myself which i will upload to help others out on this forum