pay off mortgage - Mortgage or Loan?

Hi all,
When it comes to working out APR's, mortgage interest etc, I confess I'm not in the same league as the Chase beast. 
From the 1/1/21 my Mortgage is £23,597
  • My rate is 1% above base rate
  • I am allowed overpayments and no penalty for reducing or paying off my mortgage before the end of term.
  • With my current overpayment arrangement, I am paying £650 each month
  • Interest on this is £22.67 so net I'm paying £627.33 off my mortgage each month
 I did a simple but probably incorrect calculation of 23,597/627.33 = 37 months left before mortgage finishes.
Like most blokes I'm a little impatient, at 58 I'd like to be mortgage free quicker so my wife and I can enjoy life a little more. I did a quick loan check and I am eligible for a loan rate of 2.9%. On a Loan of £23,600 over 361/2 months I would pay £591  and total payment repayable would be £24,829. So in my mind, I would pay my mortgage off approx 6 months earlier?
Then I start going round in circles with, if I pay off my mortgage now, surely I would have the interest re calculated and my actual mortgage settlement figure would be less that £23,597? I have asked HSBC for a settlement figure but am I wasting my time with looking at an alternative way to settle my mortgage debt?
Apologies if I haven't explained myself clearly.
Many thanks


  • FtbDreaming
    FtbDreaming Posts: 1,121 Forumite
    First Anniversary First Post Name Dropper
    It won’t be lower than £23,597 I don’t think. It’ll be £23,597+ interest incurred up to the date you pay the balance. If there’s no penalties for overpaying then just overpay it by as much as possible and try knock the 6 months off that way. It seems pointless swapping the mortgage balance to a loan as you would still owe the money. 
    Mortgage started August 2020 £69,700
    Mortgage ends Aug 2050 MFW: Aug 2027 
    Current Balance: £60,200 (59.9% LTV)
    MFW2020 #156 £723.13
    MFW2021 #26 £1184.71
    MFW2022 #11 £197.87
    MFW2023 £785
    MFW 2024 £528.15

    Determined to make it! 
  • Grumpy_chap
    Grumpy_chap Posts: 14,878 Forumite
    First Anniversary First Post Name Dropper Combo Breaker
    GDJTAM said:
    • I am paying £650 each month
    • Interest on this is £22.67 so net I'm paying £627.33 off my mortgage each month
    This changes with time. 
    If the interest rate is unchanged, then each month pays a bit more capital and a bit less interest.  
    So, the simple calculation of balance divided by £627.33 is incorrect.

    Mortgage interest rate is 1% above base rate.  BoE base rate currently 0.1%.  Is that the base rate your mortgage uses - it usually is.  So, mortgage rate 1.1%

    Loan rate 2.9% is a lot more expensive.

    Keep the mortgage and pay as much as possible.
  • powerspowers
    powerspowers Posts: 1,115 Forumite
    First Anniversary First Post Name Dropper
    Not just blokes that are impatient! Could you afford to overpay each month? And would that make sense ie you have an emergency pot and pension plans? 
    I’d be tempted to work out the max you can overpay and really hammer it to get it gone in a year or so 😃 but that’s because I’m nowhere near that position myself! 
    MFW 2021 #76 £5,145
    MFW 2022 #27 £5,300 
    MFW 2023 #27 £2,000
    MFW 2024 #27 £1,075 /£3,600

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