Overpaying - Lump vs Monthly - How much interest will i save?

jefferson89

Hey all,

Pretty new to the forum so apologies if make any mistakes.  Ive been rattling my brain trying to figure this out and been going at it so long i have mentally over complicated things, so hoping someone knows the formula as i am feeling in my gut it is an easy maths problem.

I currently have a mortgage that has a fixed 1.64% interest rate.  Currently it has a £3,206.45 OVERPAYMENT allowance until September 30th 2022 i could clear.  I am currently clearing this buy paying £801 per month for another 4 payments / 4 months.  I also have the means to pay the balance off in one lump sum payment.  Can anyone tell me how much interest total, i will be saying from paying it as a lump sum vs paying it off monthly in 4 more payments (ideally if there is a tool or a formula you can use even better, should i need to does this again in the future.

Thank you very much

BikingBud

There is a good ink here:

https://forums.moneysavingexpert.com/discussion/1157173/my-excel-mortgage-spreadsheet/p1

Or you could try a comparator such as found here:

http://excelworks.co.uk/default.aspx?page=30100&alias=Download Excel Mortgage Calculator Spreadsheet

jefferson89

BikingBud said:

There is a good ink here:

https://forums.moneysavingexpert.com/discussion/1157173/my-excel-mortgage-spreadsheet/p1

Or you could try a comparator such as found here:

http://excelworks.co.uk/default.aspx?page=30100&alias=Download Excel Mortgage Calculator Spreadsheet

Hey Pal,

Thanks for these tools, really great, believe i have figured it out, but these tools will for sure come in handy, thank you again

ordnancesurvey84

Assuming that you want to compare making a lump sum payment on 1st June with making four smaller payments on 1st June, 1st July, 1st August and 1st September you could think of it as follows:

Your 1st July £801 payment would have missed out on 1 month's interest compared to if the £3200 sum had all been paid on 1st June.

Your 1st August £801 payment would have missed out on 2 month's interest.

Your 1st September £801 payment would have missed out on 3 month's interest.

So the difference between the two scenarios is the amount of interest that £801 would earn over 1 + 2 + 3 = 6 months.

I.e. £801 x 0.0164 x 6/12 which is roughly £6.50

jefferson89

ordnancesurvey84 said:

Assuming that you want to compare making a lump sum payment on 1st June with making four smaller payments on 1st June, 1st July, 1st August and 1st September you could think of it as follows:

Your 1st July £801 payment would have missed out on 1 month's interest compared to if the £3200 sum had all been paid on 1st June.

Your 1st August £801 payment would have missed out on 2 month's interest.

Your 1st September £801 payment would have missed out on 3 month's interest.

So the difference between the two scenarios is the amount of interest that £801 would earn over 1 + 2 + 3 = 6 months.

I.e. £801 x 0.0164 x 6/12 which is roughly £6.50

Hey buddy thanks for this, I am about 70% with you lol, still learning. But in short are you inwould be £6.50 better.off if I paid the full lump some compared to doing monthly?

I had it as (correct if wrong) £3,206 is my lump sum, 1.64% of this is approx £52. Divide this by 12 months = £4.33 , and times it by the 4 months I am saving = £17.33?

But as I said I have been overthinking this so much my brain is fried. 

ordnancesurvey84

Yes - correct. If you paid in £3206 for four months you'd save £17.33 as you say.

If you paid in £801 monthly instead you'd save

£801 x 0.0164 x 4 / 12 = £4.38
+
£801 x 0.0164 x 3 / 12 = £3.28
+
£801 x 0.0164 x 2 / 12 = £2.19
+
£801 x 0.0164 x 1 / 12 = £1.09

which is a total of £10.94, which is roughly £6.50 less than if you'd paid the entire lump sum initially.

jefferson89

ordnancesurvey84 said:

Yes - correct. If you paid in £3206 for four months you'd save £17.33 as you say.

If you paid in £801 monthly instead you'd save

£801 x 0.0164 x 4 / 12 = £4.38
+
£801 x 0.0164 x 3 / 12 = £3.28
+
£801 x 0.0164 x 2 / 12 = £2.19
+
£801 x 0.0164 x 1 / 12 = £1.09

which is a total of £10.94, which is roughly £6.50 less than if you'd paid the entire lump sum initially.

Thanks for this, whilst i am saving, i will prbably hold onto the lump sump, as in the current times it may be better worth keeping hold of any spare money.  I appreciate all the help, thank you.