Massive Mortgage Savings

matchplayer

Martins new email, saying Vicki has posted on facebook, that ""Just gone from 4.5% to 1.5%, fixed for 5yrs, saving £350 per month. Even stayed with the same lender, so saved all the fees involved in moving too" I think Martin has missed a trick here by not saying to Vicki keep paying that extra £350 a month as an overpayment to your mortgage & working out exactly how many years she would knock off her mortgage & therefore save even more. If Vicki was already paying at 4.5% it was money she was already used to paying, that's what makes it easier to just keep paying it, rather than squander it on whatever. I estimate around 6-7 years earlier paying off her mortgage, saving around £80,000 in payments. I'm sure someone on here can do the exact figures. even if she met in the middle, saved say £150 & paid £200 overpayment. Get on that overpayment calculator Vicki & do your sums to suit you. You can enjoy a spending spree years earlier than you expected.

getmore4less

With a new rate of 1.5% fixed for 5 years there are better things to use the money for than overpay the mortgage.
savings, investment and pensions can probably do better

but lets do the numbers anyway
here is the article(link should work)
https://www.moneysavingexpert.com/tips/2020/02/05/

bit light on details

Astonishingly, Vikki on Facebook said she'll save about £20,000 over the next 5yrs: "Just gone from 4.5% to 1.5%, fixed for 5yrs, saving £350 per month. Even stayed with the same lender, so saved all the fees involved in moving too."

Lets find it on face book(no link provided)

We’ve just gone from 4.5% to 1.5% fixed for 5 years saving £350 per month even stayed with the same lender as no better deal else where so saved all the fees involved moving too.

Looks like MSE made up the £20k or just used £350*5*12=£21k


Not so easy to work back as no mortgage amount or term
(lucky I have a spreadsheet for this sort of missing info)

starting with interest only(don't need the spread sheet)
£350pm on 4.5%->1.5% is a mortgage of £140k.
Payments interest(5y)
£525 £31,500
£175 £10,500

saves £21k in interest over 5 years

If Viki kept on paying £525 after 5 years she would have £118k left and saved an extra £800 interest

More likely Viki is on a repayment lets go with 25years.

To get a £350 difference in payment that needs a mortgage of £224,510
(depending on the rounding of the £350 it may be a bit different)

payments interest
£1,247.90 £47,614
--£897.90 £15,439

If it was a 25y mortgage Viki saves £32k in interest in the 5 years of the fix

Other terms are available, shorter the term the higher the mortgage needed to get the £350 difference
eg

40y £203k
15y £243k

grumiofoundation

matchplayer wrote: »

keep paying that extra £350 a month as an overpayment to your mortgage & working out exactly how many years she would knock off her mortgage & therefore save even more.

Since you can 'beat' 1.5% quite easily in an instant access account (before even getting into pensions etc as mentioned above) locking away that money by overpaying is not necessarily the best thing to do.

matchplayer wrote: »

If Vicki was already paying at 4.5% it was money she was already used to paying, that's what makes it easier to just keep paying it, rather than squander it on whatever.

This is the reason to overpay, if you are going to otherwise waste it.

matchplayer wrote: »

I estimate around 6-7 years earlier paying off her mortgage, saving around £80,000 in payments.

Where does this come from?

getmore4less

I estimate around 6-7 years earlier paying off her mortgage, saving around £80,000 in payments.

Where does this come from?

it was an estimate, I read guess, as it depends on the payment(term) which is unknown.

Since we don't have enough information we could range the numbers but to keep it simple lets go with the single 25y scenario from above and assume we can keep the 1.5% rate for the term

£224,510 1.5% £898pm £44,853 interest
overpay as if 4.5% (+£350)
£224,510 1.5% £1, 248 £29,966

Saving in interest around £14,000

No where near £80k, as you are not saving payments if you are overpaying £350pm you are just bringing them forward.

grumiofoundation

getmore4less wrote: »

No where near £80k, as you are not saving payments if you are overpaying £350pm you are just bringing them forward.

Only way I could get near 80000 was if you, as you say erroneously, assume you are 'saving' the whole repayment for the 7 years you have taken off the 25 year term.

898*12*7 = 75432

Retired_Mortgage_Adviser

I see where you are coming from, but the base assumption in your thought process is that she would "squander the money on whatever".

Unless he knew a good amount of detail about Vicki's life, there is no way he can authoritaively advise her to use any spare funds to overpay the mortgage. There might well be other avenues to spend or invest that money which are better for her circumstances - paying off debt, swimming lessons for kids, training courses, adding to pension, etc etc.

matchplayer wrote: »

Martins new email, saying Vicki has posted on facebook, that ""Just gone from 4.5% to 1.5%, fixed for 5yrs, saving £350 per month. Even stayed with the same lender, so saved all the fees involved in moving too" I think Martin has missed a trick here by not saying to Vicki keep paying that extra £350 a month as an overpayment to your mortgage & working out exactly how many years she would knock off her mortgage & therefore save even more. If Vicki was already paying at 4.5% it was money she was already used to paying, that's what makes it easier to just keep paying it, rather than squander it on whatever.