The Ultimate Mortgage Calculator discussion

Former_MSE_Dan · 19 October 2010 at 4:47PM

Hi folks, We have spent the last few months expanding this, hopefully making it... erm, ultimate-er?! It has new calculators, including:

- Offsetting vs Savings/Mortgage
- How much can I borrow?
- Compare 2 fixed rates
- Should I save or repay mortgage?

Would be great to know what you think, and especially if you spot any glitches we have missed. We've done lots of testing but you neve know what can slip through the net!

Cheers

Dan

silvercar · 20 October 2010 at 9:54AM

Something that the offset comparison doesn't calculate:

With an offset you receive no interest on your savings, but pay interest on a smaller capital amount. With savings you receive interest on your savings. If this interest pushes you into the higher tax band you will soon automatically lose child benefit. So an offset could give you an extra income of £1040 a year for one child, more for more.

bluebelle · 20 October 2010 at 10:57AM

I've tried to use the offset tool but I just don't understand what it is telling me. Maybe I'm just being dim, but I can't see if it's saying that my scenario should be kept as savings or offet...

bluebelle · 20 October 2010 at 11:06AM

I've used the tool again to compare 2 fixed rates: why is it giving monthly payments at £10 and £17 on a £108,000 loan over 10 years? Has it gone wrong or am I reading it incorrectly? Thanks

Ferdinand_2 · 20 October 2010 at 12:35PM

I know we are always told to pay mortgage debt off but I always struggle to see how this is always correct as you have to pay a bit more interest on Mortgage normally than interest you get on savings fair enough (although in many cases at moment this isnt even true.) But you also have a large cash sum that you would lose if you pay it off, and it would presumably take a fair time by being disciplined enough to pay into a new savings plan what you used to pay the mortgage off. Sometimes over the period of the mortgage remaining you wouldnt even reach your savings pot level of now. Work it out!1 What do you say to this?

Former_MSE_Dan · 20 October 2010 at 4:28PM

bluebelle wrote: »

I've used the tool again to compare 2 fixed rates: why is it giving monthly payments at £10 and £17 on a £108,000 loan over 10 years? Has it gone wrong or am I reading it incorrectly? Thanks

Hi bluebelle,

Thanks - can you let me know the figures you entered for the 2 fixed rate deals please.

Cheers

Dan

El_Presidente · 21 October 2010 at 9:51AM

Previous thread entries from earlier in the year suggested that a split repayment/interest based calculation was on the development plan?

But it hasn't made it in, so great tool, just not for me or the many thousands of split mortgage people.

Let us know if it's on the to-do list and then we can come back.

:cool:

riskaverse63 · 23 October 2010 at 10:27AM

Love the calculator, very easy to use. Please could i make one suggestion for improvement. The offset comparison doesn't account for the fact you can move your savings from the offset into a savings account as the capital reduces - keeping the offset the same as the balance owed. The comparison would then show the true benefit of offset over the long term. I am fortunate to be doing this now, moving the oney i don't need to offset into an ISA. Win Win!
As it stands, the calculator doesn't really do justice to savvy offsetters.

getmore4less · 23 October 2010 at 11:45AM

Ferdinand wrote: »

I know we are always told to pay mortgage debt off but I always struggle to see how this is always correct as you have to pay a bit more interest on Mortgage normally than interest you get on savings fair enough (although in many cases at moment this isnt even true.) But you also have a large cash sum that you would lose if you pay it off, and it would presumably take a fair time by being disciplined enough to pay into a new savings plan what you used to pay the mortgage off. Sometimes over the period of the mortgage remaining you wouldnt even reach your savings pot level of now. Work it out!1 What do you say to this?

You must have done it wrong, you have to do proper like for likes.
same starting point same amount of money in from earnings.

With the same starting point if your mortgage rate is more the saving rate then using savings to pay off the mortgage and rebuild saving will always give you a bigger pot at the end as long as you put the same amount in.

Do the numbers and you will see for yourself.

Ok, I will do them for you.

using www.whatsthecost.co.uk

£100k mortgage @ 5% £100k savings @ 4%. 20years

mortgage is £660pm after 20years 0
100k savings @ 4% becomes £222,379.41

offset so no mortgage payment
save £660pm for 20 years @ 4% becomes £242,157.61

£20k better off.

Chris_Hinds · 23 October 2010 at 6:29PM

Something most mortgage calculators don't take into account is inflation. I'm all for minimising debt and if you have nothing else you'd want money for (Child's university fees, Home improvements, Car, Hobbies etc) then by all means pay off a mortgage faster.

However, using your own calculator:

£175k Mortgage, 2.99% Interest, 35Yr Term, £673/month payment
£10k in Savings

If you pay off £10k in Jan 2011 then you save £16945 in interest and 3yrs 5 months off the term.

Let's assume inflation runs at 3% per annum over 32.5 years (to the point you'd have extra cash available monthly):

£16945 / (1.03^32.5) = £6485

Thus you're trading £10k of spending power now for 65% of the spending power in 30 years time. Throwing all money at debt immediately isn't always the best thing to do, even though the numbers look big and impressive. Would be interesting to see it modelled rather better than the above rough calculations mind.

Kind regards

Chris

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