Mortgage Dilemma

English_Bob

My point was for people who just put a lump sum into their mortgage and then carry on paying what the bank tells them to pay each month.
If you put a lump sum into a mortgage and then continue to pay what you were originally, then you benefit as you have detailed.
I just wanted to point out that unless you are careful, the bank will recalculate the repayments and keep the term the same, making them money and not you. You will not pay your mortgage off early and you will lose out.
Trouble is with reducing the term of your mortgage, you HAVE to make the payments, putting more pressure on you in tough times.
Yes, if you put the money you save from having lower repayments into a savings account, then you would gain more interest as detailed above, but if you can afford to do this, wouldn't a straight offset mortgage be a better choice?

Dithering_Dad

setmefree2 wrote: »

No sorry I don't understand your figures.

I have a mortgage of £250,000 over 25 years. Using your 5.75% figure, it will cost me £471,830 if I pay it off over 25 years. If I pay it off in 10 years the cost is £329,308. Saving £142,522. To beat this savings figure of £142,522 I would have to have a savings rate greater than 5.75% (Tax Free) or 9.5% taxed (I am a higher rate tax payer). The ISA allowance is currently only £7k, so after that I need a savings account giving 9.5% (not too many of these around) - so thus it's better to POYM.:money:

Actually, the ISA allowance is currently only £3600 a year for a guaranteed percentage return on your investment. If you put your savings into a Stocks & Shares ISA, you get the full £7200 allowance, but returns are connected to the stockmarket and "you may get back less than you put in".

English_Bob

Setmefree2...
if you had a natwestone offset mortgage, for £250000 (house value 270000 ie worst rate for this product =7%) the figures stack up like this (i think)

to pay your mortgage off in 10 years at 5.75% your monthly repayments would be £2744.23.
assuming you can pay in £4000 in each month and afford to leave £2744.23 in at the end of each month, your total repayment with natwestone would be £301129 and you would have paid it off in 6 years instead.

(also when you have paid off more of your mortgage, you can reduce your facility with then and get a better rate)

think so anyway .... try it and let me know (i may have this all wrong!!!!)

setmefree2

English_Bob wrote: »

My point was for people who just put a lump sum into their mortgage and then carry on paying what the bank tells them to pay each month.
If you put a lump sum into a mortgage and then continue to pay what you were originally, then you benefit as you have detailed.I just wanted to point out that unless you are careful, the bank will recalculate the repayments and keep the term the same, making them money and not you. You will not pay your mortgage off early and you will lose out.

I see your point and totally agree.:D

setmefree2

Dithering_Dad wrote: »

Actually, the ISA allowance is currently only £3600

You're right - I always think in terms of double allowance - me and MR SMF2.:D

setmefree2

English_Bob wrote: »

Ragingbass is right, but it's worse than that.
Even if your bank calculates the interest daily, you still lose out.

It is this bit that has confused me.:rolleyes: Sorry if I'm just being thick.:D

Kaz2904

This point in question is only relevant to those who pay by direct debit because if you pay by standing order then you decide how much you'll pay every month.
The downside to this is remembering to up your minimum payment if the interest rate changes!