Can someone help me calculate two overpayment options. My working outs don't seem to make sense

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I have c£85000 left on my mortgage and 17 years to run. I am on a very nice variable rate so although it has recently been increasing it has always stayed roughly on a par with available savings rates. Since I took my mortgage out I've been diligently putting money into savings bit like offsetting. 
I've got to the point now where I have more money in savings than I do in debt so theoretically I could/should pay my mortgage off and live the dream. Trouble is for 10 odd years I've been so cautious it feels odd to clear out my account even though it would obviously save me money.
I like the cheap credit the mortgage gives me, if I wanted a new bathroom I could pay for it with the savings rather than on a loan with likely higher lending rates. 
I thought I could test my mettle by only paying off half of my mortgage and seeing how I felt for a year afterwards. I know I can choose whether my overpayments reduce the term or reduce the monthly payments (keeping the term) 
I put the numbers in the MSE overpayment calculator and got these results which don't make sense

£85000 @3.5% for 17yrs = £112930 total with no overpayments
£85000 @3.5% with single £35k overpayment = £93270 total meaning a saving of £19660 and reducing the term by 8.2 years
£85000 @3.5% with single £35K overpayment but keeping the 17yr term (with reduced monthly payments) appears to save  £46500 which is way more of a saving that it seems too good to be true.

What am I missing and does anyone have any advice about how to approach this. I quite like the idea of keeping my term and paying a pittance in monthly payments but I feel I am overlooking something important

Any ideas?

Comments

  • Jimmar
    Jimmar Posts: 36 Forumite
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    ETA there are no overpayment penalties and I have an emergency fund in the background and no other debts. 
  • Brie
    Brie Posts: 10,457 Forumite
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    I'll run the numbers but wanted to say that if you could nuke the mortgage you would be able to put even more money into savings and so would build up a tasty emergency fund quite quickly.
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • Choirgrl
    Choirgrl Posts: 162 Forumite
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    edited 22 January 2023 at 4:10PM
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    I’m guessing  that you’ve got the figures for keeping the term by calculating the cost of a £50k mortgage over 17 years and comparing it to the cost of £85k one over the same period. If so, that £46.5 k saving doesn’t take into account the £35k overpayment. The saving in your third scenario is therefore  more like £11.5k.
  • MFWannabe
    MFWannabe Posts: 2,025 Forumite
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    Personally I’d pay mortgage off if I still had emergency fund 
    you can then quite quickly top up your emergency fund 👍
    31/03/24:  Debt total £12,400/13,192.13
  • Brie
    Brie Posts: 10,457 Forumite
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    Did a simple* calculation which suggests the following
    1 - monthly payment of £585 over 17 years gives a total paid of £112492
    2 - monthly payment of £585 over 8+ years gives a total paid of £92549
    3 - monthly payment of £269.50 over 17 years gives a total paid of £100336

    So the big difference that I see is between 2 & 3 where the reduced monthly amount means you end up paying so much more in interest.  Less of course than in 1 but still quite a lot.

    Given that you're on a variable rate which may very well go up in the next year or two I would suggest that maxing your overpayment to lessen the interest over the next several years would be the best option.  It sounds like you have enough money if you are saving as well as paying the mortgage and anything lost to your savings (aka the overpayment) will be quickly regained.

    *simple as in done on an annual basis rather than daily compound which is beyond my excel skills.
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • South_coast
    South_coast Posts: 4,972 Forumite
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    edited 22 January 2023 at 11:04PM
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    I've never quite understood the "Keep the term the same, but have smaller monthly payments" idea (unless someone has unaffordably high monthly payments, in which case it then makes perfect sense!) I made a few large payments to my mortgage in the last few months before I cleared it and the bank lowered the direct debit in order for it to continue to run to the original term, so at one point I ended up with a £12.99 monthly payment. Sounds great initially, but as the interest was still charged on the whole outstanding balance, about £8 of that was interest - that adds up to a lot of unnecessary interest over 21 years 😳!

    I would clear it. It's what you've been saving the money for, after all, and as others have said you'll quickly be able to save up for things you want once the mortgage is out of the way
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • Jimmar
    Jimmar Posts: 36 Forumite
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    You found my error Brie and Choirgirl, thank you for figuring it out, especially the calculations. 
    The numbers Brie ran shows that overpaying would definitely save at least £12000 with a further saving of another £75000 if I shorten the term. 
    I think I should pluck up the courage and part with the cash if nothing else to avoid going over the FSCS protection limit. 
    MFWannabe's view is tempting but I think I will pay part of it down this year and then restore as much of it as I can during the year and then pay the remainder off next year. It will still mean I've paid it off well early but without the leap into the unknown. 
    Funny thing - all those years ago when I started saving I never anticipated being reluctant to let go of the mortgage when the opportunity came!
  • Jimmar
    Jimmar Posts: 36 Forumite
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    I would clear it. It's what you've been saving the money for, after all, and as others have said you'll quickly be able to save up for things you want once the mortgage is out of the way
    You're right of course, when I first started there was no doubt in my mind about paying it off as soon as I had the cash and that has been the goal up until I had amassed enough money to pay it off. 
    I expect both things are linked to a ridiculously cautious attitude to money. 
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