Remortgage Query

holly876dog

Hello all,
I know you're all clever out there so here's my query....

Just got my annual mortgage statement and lets put it this way, my jaw dropped when I saw how much capital I had paid (or not!). So I would like my money to work a bit harder for once (hopefully...!)
Looking at remortgage as fixed rate now up. Need mortgage of 67K, house value 220K. I am 20%taxpayer. Would like to overpay £400/month and have daily int/low set up costs (as its 67k)
Looked at couple of mortgages both over 2yrs
1. Tracker at 4.64 (boe-0.11%), set up costs £75 but no overpayments allowed. I see Abbey has just launched monthly saving account at 7% gross so I could put £400/month and wait until 2yr tracker up and then use this to cut mortgage, or......
2. Go with tracker of 5.14% (boe+0.39), set up costs £150 but this has overpayment facility so I could pay £400/month and as its daily int then amount owed reduces straight away
For sake of argument lets say int rates don't change (ok big assumption I guess...!)
Can anyone out ther help with calcs to determine which one I would be better or with?
Many Thanks.

Robert_Sterling_3

I have written on this subject in other posts within the last few days.
You are considering paying an extra 0.5% on a £67000 mortgage ( Extra £335 per annum at first ) so that you can overpay the mortgage instead of puting money into savings.  OK then you pay about £5000 extra off mortgage in first year ( drip fed though in 12 installments )
This is worth about £25 in year one £75  in year two
£125 in year three  ... Compared with having it in taxed savings.
Don't forget it is costing you about £335 in year one  About £300 in year 2 etc

So Forget it

holly876dog

Thanks Robert.
What you are telling me is that i would be better off putting my overpayment in the account mentioned and going with the cheaper mortgage rate?

Just one question - I see from your calcs that, should I pay 400/month then I only benefit to the tune of £50 ave over 2 yrs, why is this so low? I thought that overpaying by this much per month, according to 'mortgage experts' is the way to get your mortage paid off years earlier

alexei_2

Instead of having a flexible mortgage that allows you to overpay, why not reduce the term of the mortgage. You may be able to get a better rate this way?

holly876dog

Certainly in my case, if I were to reduce mortgage term (and you are quite right instead of overpaying), however, my job is not that secure right now and if I were to be made redudant then I would have bigger mortgage payments to meet. Its probably safer to have slightly longer term and overpay just in case the worse happens...