Overpayment

matimage · 15 January 2008 at 12:06PM

Hi All,
I made a £4000 overpayment on my mortgage yesterday. I asked for it to come off the term so I pay the same monthly amount.

I owe £148,000 and have around 20 years left. Currently on a deal of 0.04% above base rate. This is going to change end of March to 0.19% above base (best deal I could find).

I have worked it out that the overpayment will save me £23,756 and knock 2yrs 5mths off the mortgage.

Can anyone tell me if my sums are correct or waaaaaaaay off!

Ta muchly!

cupid_s · 15 January 2008 at 12:22PM

I work out you're saving 11 months off the mortgage, and around £8000

But that's still pretty amazing I think

matimage · 15 January 2008 at 12:30PM

Whoops, big difference there! Sorry, I also meant to add that I am paying another 4k in a couple of weeks.

So the overpayment will be £8000.

cupid_s · 15 January 2008 at 12:39PM

That would save you a year and 10 months i reckon, and about 15k in interest.

oh and well done on all these overpayments!

matimage · 15 January 2008 at 12:59PM

Thanks!
I am self employed so it seemed silly having large savings and getting taxed on them when it would make more sense to stick it on the beast that is the mortgage.

rjm2k1 · 15 January 2008 at 1:49PM

IIRC you pay roughly double what you borrow over a 25 year mortgage, so a pound borrowed at the start costs you a pound in interest. So as above, if you pay off 4k at the start, it will save you roughly 4k in interest over the period of the loan. As time goes on, you will save less by paying more off since you will have already paid more of the interest off in the earlier years.