Mortgage overpayments and that...
Discussion
One for the PH moneywranglers perhaps.
Mortgage with ING; apparently I can make overpayments that 'creates an overpayment reserve'. OK, with you so far.
If, for example, I throw 5 grand into the pot, their online calculator tells me it will HAVE THE EFFECT of lopping xxx months off my mortgage and save me £yyy interest... but without EITHER reducing monthly payments or the remaining term.
So what's the point? How, precisely, do I save this £yyy interest - in short, why bother? Would it make more sense leaving the £5K to rot in a savings account, with, say...
... 
Icelandic Bank ?
Mortgage with ING; apparently I can make overpayments that 'creates an overpayment reserve'. OK, with you so far.
If, for example, I throw 5 grand into the pot, their online calculator tells me it will HAVE THE EFFECT of lopping xxx months off my mortgage and save me £yyy interest... but without EITHER reducing monthly payments or the remaining term.
So what's the point? How, precisely, do I save this £yyy interest - in short, why bother? Would it make more sense leaving the £5K to rot in a savings account, with, say...
... Icelandic Bank ?Roger McLittriss said:
One for the PH moneywranglers perhaps.
Mortgage with ING; apparently I can make overpayments that 'creates an overpayment reserve'. OK, with you so far.
If, for example, I throw 5 grand into the pot, their online calculator tells me it will HAVE THE EFFECT of lopping xxx months off my mortgage and save me £yyy interest... but without EITHER reducing monthly payments or the remaining term.
So what's the point? How, precisely, do I save this £yyy interest - in short, why bother? Would it make more sense leaving the £5K to rot in a savings account, with, say...... Icelandic Bank ?
Unless this is some funky mortgage whereby if you overpay, it doesn't allow you to reduce monthly payments, then it's pretty simple..Mortgage with ING; apparently I can make overpayments that 'creates an overpayment reserve'. OK, with you so far.
If, for example, I throw 5 grand into the pot, their online calculator tells me it will HAVE THE EFFECT of lopping xxx months off my mortgage and save me £yyy interest... but without EITHER reducing monthly payments or the remaining term.
So what's the point? How, precisely, do I save this £yyy interest - in short, why bother? Would it make more sense leaving the £5K to rot in a savings account, with, say...
... Icelandic Bank ?Every penny of overpayment you make, will go on capital, not interest, therefore the compound interest savings over time are HUGE. Eg. On a 30 year fixed rate here in the US, 13 payments a year will reduce the term to 16 years...
Every pound extra in overpayments will save 2 in the long run, so the saying goes.
EDIT - having read your post.. ignore mine! I don't understand this weird product..!
Edited by Papoo on Tuesday 14th October 00:00
Roger McLittriss said:
their online calculator tells me it will HAVE THE EFFECT of lopping xxx months off my mortgage and save me £yyy interest
That part seems completely normal.Roger McLittriss said:
but without EITHER reducing monthly payments or the remaining term.
That seems inconsistent with the first part, are you sure you have got it right? What's the exact wording?Ing calculator
"Making overpayments
With the ING Direct Flexible Mortgage, you can choose to make monthly or lump sum overpayments. This will reduce your total payments and could knock years off your mortgage term, provided you continue to make your normal monthly payments.
It also allows you to make underpayments in the future"
Thats straight from their website, so should be right unless you've been using a different calculator.
"Making overpayments
With the ING Direct Flexible Mortgage, you can choose to make monthly or lump sum overpayments. This will reduce your total payments and could knock years off your mortgage term, provided you continue to make your normal monthly payments.
It also allows you to make underpayments in the future"
Thats straight from their website, so should be right unless you've been using a different calculator.
Roger McLittriss said:
their online calculator tells me it will HAVE THE EFFECT of lopping xxx months off my mortgage and save me £yyy interest... but without EITHER reducing monthly payments or the remaining term.
I think what it's getting at though is if you make overpayments and then reduce your agreed payment or take a payment holiday then the term or amount payable is not reduced Edited by Brite spark on Tuesday 14th October 00:17
Here you go:
https://secure.ingdirect.co.uk/INGDirect.html?comm...
Unless it's just not made clear to a simpleton like me, when I put in the appropriate figures the monthly payment stays the same and it says 'Equivalent to reducing payment term by xxx/yyy'.
So either it does, or it doesn't. What's 'equivalent'?
https://secure.ingdirect.co.uk/INGDirect.html?comm...
Unless it's just not made clear to a simpleton like me, when I put in the appropriate figures the monthly payment stays the same and it says 'Equivalent to reducing payment term by xxx/yyy'.So either it does, or it doesn't. What's 'equivalent'?
Roger McLittriss said:
Here you go:
https://secure.ingdirect.co.uk/INGDirect.html?comm...
Unless it's just not made clear to a simpleton like me, when I put in the appropriate figures the monthly payment stays the same and it says 'Equivalent to reducing payment term by xxx/yyy'.
So either it does, or it doesn't. What's 'equivalent'?
link has timed out, previous post edited for clarityhttps://secure.ingdirect.co.uk/INGDirect.html?comm...
Unless it's just not made clear to a simpleton like me, when I put in the appropriate figures the monthly payment stays the same and it says 'Equivalent to reducing payment term by xxx/yyy'.So either it does, or it doesn't. What's 'equivalent'?
OK, tell you why. Barclays keep bombarding me with el cheapo loan deals. So I thought, why not take out a bank loan and chuck it on the mortgage, 'cos the interest on the loan over say 3 years will be less than the interest I'd save on the mortgage... OK, so I have to eat beans on toast for a few months while I pay off the loan but heyho.
Ok, here we go, and I think I have got this right ........
It is slightly dependent upon whether you choose a "Standard Variable" or "fixed Rate" mortgage.
With a "Standard Variable" mortgage, you can make "Overpayments" as much and as often as you want, but this does not reduce your monthly payments of the amount of interest you pay (it just allows the bank to use your money to generate wealth for them), however, it allows you to "Underpay" as long as you need (credit crunch and all that) provided there is enough built up in your "Overpayment Reserve", or you can take a payment break from your mortgage to a maximum of 6 months during the life of your mortage (maximum of 3 months at any one time) again providing there is sufficient funds in your "Overpayment Reserve". And finally, you can use the remaining balance of your "Overpayment Reserve" to pay off your mortgage earlier when you need to at a later date, you just didn't make any money on your savings during this period.
With a "Fixed Rate" mortage you can make capital repayments of up to 10% of the original loan amount, but if you exceed this amount during the "Fixed Rate" period and/or repay your mortgage, you will be penalised 1.5% of the amount overpaid as a fee.
So basically, if your in a position to "Overpay" and sometimes "Underpay" if necessary, keep the addditional funds in an account of your own (with good access) and use it when you need to, but don't forget to make sure no more than £50k in any one account (I think we all know why).
Ta da ............ hope it helps!
It is slightly dependent upon whether you choose a "Standard Variable" or "fixed Rate" mortgage.
With a "Standard Variable" mortgage, you can make "Overpayments" as much and as often as you want, but this does not reduce your monthly payments of the amount of interest you pay (it just allows the bank to use your money to generate wealth for them), however, it allows you to "Underpay" as long as you need (credit crunch and all that) provided there is enough built up in your "Overpayment Reserve", or you can take a payment break from your mortgage to a maximum of 6 months during the life of your mortage (maximum of 3 months at any one time) again providing there is sufficient funds in your "Overpayment Reserve". And finally, you can use the remaining balance of your "Overpayment Reserve" to pay off your mortgage earlier when you need to at a later date, you just didn't make any money on your savings during this period.
With a "Fixed Rate" mortage you can make capital repayments of up to 10% of the original loan amount, but if you exceed this amount during the "Fixed Rate" period and/or repay your mortgage, you will be penalised 1.5% of the amount overpaid as a fee.
So basically, if your in a position to "Overpay" and sometimes "Underpay" if necessary, keep the addditional funds in an account of your own (with good access) and use it when you need to, but don't forget to make sure no more than £50k in any one account (I think we all know why).
Ta da ............ hope it helps!
Rupert Da Fridge said:
Ok, here we go, and I think I have got this right ........
It is slightly dependent upon whether you choose a "Standard Variable" or "fixed Rate" mortgage.
With a "Standard Variable" mortgage, you can make "Overpayments" as much and as often as you want, but this does not reduce your monthly payments of the amount of interest you pay (it just allows the bank to use your money to generate wealth for them), however, it allows you to "Underpay" as long as you need (credit crunch and all that) provided there is enough built up in your "Overpayment Reserve", or you can take a payment break from your mortgage to a maximum of 6 months during the life of your mortage (maximum of 3 months at any one time) again providing there is sufficient funds in your "Overpayment Reserve". And finally, you can use the remaining balance of your "Overpayment Reserve" to pay off your mortgage earlier when you need to at a later date, you just didn't make any money on your savings during this period.
With a "Fixed Rate" mortage you can make capital repayments of up to 10% of the original loan amount, but if you exceed this amount during the "Fixed Rate" period and/or repay your mortgage, you will be penalised 1.5% of the amount overpaid as a fee.
So basically, if your in a position to "Overpay" and sometimes "Underpay" if necessary, keep the addditional funds in an account of your own (with good access) and use it when you need to, but don't forget to make sure no more than £50k in any one account (I think we all know why).
Ta da ............ hope it helps!
M'yerse. My thinking was that 5 big ones in National Bank of Gordonia wouldn't make much anyway so it'd be better doing some good elsewhere.It is slightly dependent upon whether you choose a "Standard Variable" or "fixed Rate" mortgage.
With a "Standard Variable" mortgage, you can make "Overpayments" as much and as often as you want, but this does not reduce your monthly payments of the amount of interest you pay (it just allows the bank to use your money to generate wealth for them), however, it allows you to "Underpay" as long as you need (credit crunch and all that) provided there is enough built up in your "Overpayment Reserve", or you can take a payment break from your mortgage to a maximum of 6 months during the life of your mortage (maximum of 3 months at any one time) again providing there is sufficient funds in your "Overpayment Reserve". And finally, you can use the remaining balance of your "Overpayment Reserve" to pay off your mortgage earlier when you need to at a later date, you just didn't make any money on your savings during this period.
With a "Fixed Rate" mortage you can make capital repayments of up to 10% of the original loan amount, but if you exceed this amount during the "Fixed Rate" period and/or repay your mortgage, you will be penalised 1.5% of the amount overpaid as a fee.
So basically, if your in a position to "Overpay" and sometimes "Underpay" if necessary, keep the addditional funds in an account of your own (with good access) and use it when you need to, but don't forget to make sure no more than £50k in any one account (I think we all know why).
Ta da ............ hope it helps!
Always assuming ING don't go teats-heavenward anytime soon.
I think in ING's small print it says you can't take more than 3 'payment holidays' in any 12 month period so the 'Overpay/Underpay' option is a bit limited - may as well leave the money in savings if you're likely to need cash so badly that you have to miss paying the mortgage.
In case anyone else wants to frighten themselves, here's a nifty calculator that will show you in glorious technicolour and pretty pictures exactly how you get botty-reamed over your hovel (needs Java):
http://www.jeacle.ie/mortgage/uk/
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