i know i sound dumb compared to all you money saving expersts but....

harrased-gf

Hi

I have posted a longer version of this thread previously but received no replies.

I am new to this site so

1. Can anyone point me in the direction of where to find advice on checking that the payments and interest made on our mortgage have been correct. Are there any standard letters anywhere. Plus does anyone know if it is possible to claim for insurance that was sold along with the mortgage
2. We have just over £5,000 left to pay on our repayment mortgage at 7.950% variable with the Abbey.
The monthly payments are £80 but we pay £120.
Can anyone work out how long it will take us to pay off the mortgage and
would it be better to overpay a bit more . We could probably manage another £20 - £40 a month.

It seems its impossible to move the mortgage to another company - noone seems to want to take on such a small ammount.

Advice greatly appreciated.

george_jetson

There is a sticky post in this forum that has lots of overpayment calculaters such as this one

I don't really understand your first question - surely your mortgage lender would be able to provide the information you want? Alternatively I think Citizens Advice Bureaux have counsellors who can help with money problems.

FreedomGirl

Hi,

Firstly, congratulations on being almost mortgage free, and on being able to overpay by at least 50%.

I can't help answer the questions about mortgage interest calculations (at least not without looking at the numbers that you've got worries about ), nor about insurance (I think the CAB suggestion is a good one though).

I also have a different type of mortgage to yours, but it's the kind that encourages you to get your calculator out so you get maximum benefit so I don't mind doing rough and ready calculations.

I've got a really simple way of calculating what difference an overpayment will make. It doesn't include calculation of interest repayments on your outstanding mortgage, but that's really quite a small number now.

You owe £5000. You are paying £120/month. £5000 divided by £120 gives 42 months, i.e. 3.5 years until you've paid it off

If you up your repayments to £160/month, then £5000 divided by £160 gives 31 months i.e. just over 2 and a half years until you've paid it off

(Before I get beaten up by the "experts", I know I haven't considered the interest repayments. But the delta in interest due to the differing time profiles for paying it off, is not going to be huge).

If you add on the time needed to pay off the interest on the mortgage, I'm guessing (no calculators here!!) that

At £120/month, it will be about 4 years
At £160/month, it will be about 3 years

Things to check before upping your repayments:

- Do you have enough emergency savings easily available? (and/or can you reduce your overpayments if you need the extra cash)
- Is repaying extra (and finishing early) going to introduce a big charge?
- Do you have to pay an extra charge once you finish your mortgage (exit fee)

Don't worry too much about the interest rate being higher than other mortgages (and thus wanting to move). You're on track to pay off the money in a few years, so it's not going to make a huge difference

You're on the home straits - enjoy

HTH

FG

getmore4less

FreedomGirl wrote: »

Hi,

(Before I get beaten up by the "experts", I know I haven't considered the interest repayments. But the delta in interest due to the differing time profiles for paying it off, is not going to be huge).

Whats all this interest delta, time profile stuff?

The Interest due at any time is based on the interest rate and the outstanding Debt. and mortgage term makes no difference at all. the payments due on a 5 year loan are the same as those on the last 5 years of a 25year loan. and the interest will add a fair few months to a loan so you canot ignore it in making estimates

A better rouge guide it to guess the years and add interest for 1/2 the amount for the full years. all though this will still tend to underestimate. these days there are so many caclulators out there it is better just to use them.

eg:
So £5k at 7.95% over 4 years (48 months)
Estimate is £795 interest, monthly payment 120.73.
calculator gives £854.60 interest monthly payment £121.97.

So significant underestimate but not as bad as ignoring the interets completely

eg;

say £5k £120pm

0% is just under 42 months
7.95% is just under 49 months thats 7months more ,
or requires a payment of £137 to complete in 42 months

Thats a time increase of 17% or a payment increase of 14.2%

You cannot ignore the interest and make reasonable estimates.

Jonbvn

Hi,

Based on my calculator (which includes interest), I have worked out the following:

1. Based on the information you have supplied, 5k at 7.95% with a payment of 80pcm means that the remaining term on your mortgage is 81 months (About 6.5 years) and would finish in Oct 2014. Total interest paid 1477.19.

2. If you overpay by GBP40 with a total monthly payment of GBP120 your mortgage would finish in Feb 2012 - 4 years from now. Total interest paid 870.69.

3. If you overpay by GBP60 with a total monthly payment of GBP140 your mortgage would finish in June 2011, approx 3.5 years from now. Total interest paid 724.44.

4. If you overpayby GBP80 with a total monthly payment of GBP160 your mortgage would finish in Jan 2011, approx 3 years from now. Total Interest paid 621.10.

This means that FreedomGirl is a clever girl!

HTH.

FreedomGirl

Hi Jonbvn,

Aw shucks - bit

Hi getmore4less. Sorry - that was geeky shorthand describing what a graph of the reducing balance with time would look like for two different monthly repayment rates. The point I was trying to make was that the difference ("delta") in interest between a 2.5 and 3.5 year duration (as paid over the whole period of repayment) would not be that great (my guess was around six months of monthly payments for both - which is the same as your rule of thumb, if I read it right).

My point was that you're going to pay roughly the same amount of interest whether you go for £120 or £160/month, so I think that the key point the OP needs to decide on is whether they can afford the extra payments (and want to be mortgage free a year earlier).

Jonbvn's numbers back that up - interest for 4 year period was £870.69, and interest for 3 year period was £621.10. Difference is just under £250, i.e. around 2 months payments. £250 is not "nothing", but it's only 5% of the outstanding mortgage balance.

(You still there harrased-gf ? Don't be scared of all the numbers Jonbvn's post shows you when you'll be mortgage free depending on how much you pay in per month!)

HTH

FG

harrased-gf

hi

Thanks to everyone who has posted replies.

My boyfriend took the mortgage out in 1980 (he thinks) I have only lived here since 2003 so I don't know much about the preceeding years. Whenever I ask him questions about the mortgage he doesn't seem to know the answer and because I am not on the mortgage the Abbey won't deal with me. So I have told him to go the branch tomorrow and speak to them.

Going by all your calculations then I think we are in a really good position. We do have some back savings which if we pooled together we could possibly pay off the mortgage completely. I am reluctant to do that because he has a car loan which i think he should pay off first!!!

So BIG THANKS to you all.

Harassed GF

FreedomGirl

Hi,

Hmm...paying off that car loan could be a good idea as well. But you need to find out whether, if you pay it off early you still have to pay all the outstanding interest (i.e. there's no benefit in paying it off early).

Your BF is lucky that you're paying attention to all this stuff. I hope that saying this doesn't cause a big fight, but, if you've been paying towards part of the mortgage for a while, it's probably fair that he gives you a share of the house?? This is even more true if you're putting part of your savings towards clearing the balance !!

(I'm recently married and have got savings in ISAs which could be used to clear off our mortgage balance. But, I'm keeping them aside, whilst we both pay off the mortgage, because it's part of my retirement pot and, once you take the money out, you lose the tax benefits. You might want to keep your funds to one side? We own the house 50:50 so there's not an issue there)

It might be worthwhile just posting the total debts and assets to the board. I'd assuming that, because you had such a good level of savings, that you didn't have any other debts - my mistake

Here's some mostly made up numbers, for you to change
Car loan - £5000
Mortgage - £5000
Credit and other cards - £0 (I'm hoping this is zero)
Overdraft - £0 (I'm hoping this is zero, too)

The reason why I'm hoping the c/card and overdraft are zero is that it probably means that your overall finances are not under strain.

Hope you don't mind these questions

FG

harrased-gf

Hi freedom girl

Thanks for your response
The subject of the house and him making a will is a very sore subject so I am holding on to my savings very tightly. Our finances are seperate apart from a joint savings account which only has a few hundred quid in - saving for holidays etc.
I look on my contribution to the mortgage as being far cheaper than rent so am fairly happy with the arrangement.

I have no debts, I personally owe nothing to anyone. I despise credit cards with a vengence and have been spouting off for years about the dangers of credit and quite often have a go at those people who stand in shopping centres trying to sell them to you!! (oh the satisfaction of it)

I have a pension, and ISA, a works saving scheme, and a couple of other savings accounts.
Boyfriend has the car loan and a credit card which he only uses once or twice a year whilst on holiday and he always pays off the full ammount as soon as he gets the bill.

I am avid bargain shopper and will be contributing to the Shopping forum too when I get the chance.

Thanks so much for your advice - this is a great site

harrased gf

FreedomGirl

Hi Harrased,

Ooof - you're not p*ssed off at me and you've got your head screwed on tight re money ! You are so not as "dumb" as you think you are (re your post title!)

The following is just an off the wall question which you might want to consider (and given the fact it's a sore subject, you probably don't want to ask it right now). Does your BF intend to start charging you rent once his mortgage is paid off?

Best of luck

FG

harrased-gf

Thanks Freedomgirl for all the advice and info. and knowing him he probably will want me to pay rent!!! he'll be waiting a long time for it too