how much to make a difference?

r.mac_2

Hiya

we are in the process of moving house and have substantially upped our mortgage (just got married and bought a bigger house for the longer term):rolleyes:

We like the idea of paying it off early, however don't ahve lots of spare cash at our disposal right now. Our initial financial aim is to build up an emergency cash fund (baby fund) before putting cash into the mortgage.

however, how much would we have to pay in per month to amke a difference? I mean - would even an extra £20 per month actually make any noticable change?

I'm not sure how to calculate this?:o

CLAPTON

it depends upon how much the mortgage is for, what the apr is, the monthly repayments and the period of the loan and whether you are allowed to make overpayments

r.mac_2

I know we can make over payments up to a max of 10% per annum.

the mortgage is over 30 years and we pay approx £1500 per month (capital and interest repayment). The apr is competetive, but I can't remember the eaxact rate off hte top of my head - approx 6.something%

bekkki1

http://www.channel4.com/money/homebuying/overpaycalc.html

if you have a play around with your figures on this it will show you the intrest you will save - and how many months/years also

r.mac_2

thanks bekki - htat's really useful. I appreciate your help

catshark88

Hi r.mac,

As a very basic calc., every £1 you pay off in the early days of the mortgage, equates to £3 saved (due to avoided interest).

Have a play with the calculator Bekki1 mentioned or one of the others available. Very illuminating!

r.mac_2

oh my goodness - I have just had a play with the calculator to see the potential savings!!!!! :eek:

It's brilliant and I can't believe that even small payments will make a huge difference - so we will start with smaller amounts then build up as our income increases.

*hubby got a promotion yesterday - guess where his increase in salary is going!*

Jonbvn

Remember that for most mortgages, over-payments cannot be recovered easliy (without remortgaging). It is wise to have a rainy day (or baby) fund for emergencies. I would suggest you use ISA's for your savings.

Your mortgage rate above 6.0% does seem a bit on the high side. As such, in your case it is likely to be of more benefit to pay down the mtg rather than save more (than your baby fund).

r.mac_2

Jonbvn wrote: »

Remember that for most mortgages, over-payments cannot be recovered easliy (without remortgaging). It is wise to have a rainy day (or baby) fund for emergencies. I would suggest you use ISA's for your savings.

Your mortgage rate above 6.0% does seem a bit on the high side. As such, in your case it is likely to be of more benefit to pay down the mtg rather than save more (than your baby fund).

Yes, that's good advice.

We are saving up a cash fund at the moment. For numerous things, but particularly as we know it can be hard to draw back out of the mortgage.

the mortgage is on two rates as we managed to port our current one - 6% is the higher part. It was still the best deal we could get, but we are still keen to chop it down as much as possible over time.

thanks for all your help guys:j