Payoff 50% of Mortgage or reduce overall Mortgage Term 7 February at 1:18PM in Mortgages & endowments 1 reply 142 views

vinnieuk

Hi,

I'm considering paying off part of my mortgage currently which is around 150k Lifetime tracker 0.75% + BoE Baserate so now 4.75% 14 Years left.

As I understand it the best choice when overpaying is to always reduce the remaining Term (Years/Months) remaining.

Which is the best Choice in the following example.

Option 1 -   Payoff 50% reducing monthly repayments by around half and keeping the term at 14 years

Option 2  - Payoff 50% reducing the remaining term by around half 7 years (estimate) keeping the month repayments at same rate

While both would obvious save a large amount of interest over the durations which option would save the most in interest over the course of the mortgage, I can't seem to get the correct calculation to work out which will save the most in interest payments.

Thanks,
Vinnie

picky123

Assuming you can make unlimited overpayments, the obvious choice must be option 1 but over pay each month at the rate you are paying now.

That way, if a disaster occurs and income drops you have a lower contractual payment and some flexibility.

If you can not make overpayments, then it has to be option 2 for max interest saving