Mortgage over payment query

[egor110]

Just got my annual statement thru and as of 1 jan we have £39,982 left to pay.

We're currently over paying £200 month.

I've just whacked in a lump sum of £500 and put the figures in a over payment calculator and it's spat out these figures.

If i up my monthly over payment to £250 we'd save £2638 in interest and pay it off 1 year 5 months early.

If i whack down another £500 lump sum we'd save £2794 interest and pay it off 1 year 5 months early.
.
Is it worth the extra £500 lump sum when i'm only going to save £156 extra interest and we'll still end up paying it off in 2019 regardless.

Should i stick it in a savings account instead ?

[33q]

Surely the quick answer is to determine if the interest rate on a savings account less tax is better than the interest rate being charged on your mortgage.

EG ....stick money into a Santander current account etc pays 3% gross....allow for whatever tax your are paying

Is this greater than your mortgage interest rate?

[egor110]

33q said:

Surely the quick answer is to determine if the interest rate on a savings account less tax is better than the interest rate being charged on your mortgage.

EG ....stick money into a Santander current account etc pays 3% gross....allow for whatever tax your are paying

Is this greater than your mortgage interest rate?

The mortgage is 2.50% the santander is 3% minus 20% tax and there monthly fee.

The mortgage will be paid off in 2019 it regardless , just a interest saving of £156 to whack down a extra £500 over payment didn't jump out as being that impressive.

[Countdown]

£156 interest from £500 seems quite a good rate.....

[33q]

from April you may not need to pay tax

Individuals will get the first £1000 interest free of tax...for 20% payers

Put your savings into the lowest tax bracket payers name

[DonkeyApple]

What about calculating against whacking the money into your pension and claiming the tax back on it?

That should dwarf either a conventional savings account and the mortgage rate?

[egor110]

33q said:

from April you may not need to pay tax

Individuals will get the first £1000 interest free of tax...for 20% payers

Put your savings into the lowest tax bracket payers name

We're both 20% tax payers and paye

[33q]

I think you have your answer....don't pay off your mortgage....but the OPs comment about sticking any excess funds into a pension is sound advice.

I am retired.......but I still pay into a pension as the government effectively increases my contribution by £120 per month. It would be rude not too.

[egor110]

33q said:

I think you have your answer....don't pay off your mortgage....but the OPs comment about sticking any excess funds into a pension is sound advice.

I am retired.......but I still pay into a pension as the government effectively increases my contribution by £120 per month. It would be rude not too.

Re my royal mail pension i pay in as much as i'm allowed to so i guess i'd have to start a 2nd private pension.

[CarlosFandango11]

egor110 said:

Just got my annual statement thru and as of 1 jan we have £39,982 left to pay.

We're currently over paying £200 month.

I've just whacked in a lump sum of £500 and put the figures in a over payment calculator and it's spat out these figures.

If i up my monthly over payment to £250 we'd save £2638 in interest and pay it off 1 year 5 months early.

If i whack down another £500 lump sum we'd save £2794 interest and pay it off 1 year 5 months early.
.
Is it worth the extra £500 lump sum when i'm only going to save £156 extra interest and we'll still end up paying it off in 2019 regardless.

Should i stick it in a savings account instead ?

Your savings of £2794 from a £500 lump sum over payment is wrong. Check your figures before making any decisions!

[egor110]

CarlosFandango11 said:

egor110 said:

Just got my annual statement thru and as of 1 jan we have £39,982 left to pay.

We're currently over paying £200 month.

I've just whacked in a lump sum of £500 and put the figures in a over payment calculator and it's spat out these figures.

If i up my monthly over payment to £250 we'd save £2638 in interest and pay it off 1 year 5 months early.

If i whack down another £500 lump sum we'd save £2794 interest and pay it off 1 year 5 months early.
.
Is it worth the extra £500 lump sum when i'm only going to save £156 extra interest and we'll still end up paying it off in 2019 regardless.

Should i stick it in a savings account instead ?

Your savings of £2794 from a £500 lump sum over payment is wrong. Check your figures before making any decisions!

£2685 ? the £500 lump sum is as well as £250 extra per month.

[CarlosFandango11]

egor110 said:

£2685 ? the £500 lump sum is as well as £250 extra per month.

Ah, ok.

Even £156 from a £500 lump sum sounds wrong if your mortgage will be paid off in 2019, unless your mortgage rate is over 7%

[egor110]

CarlosFandango11 said:

egor110 said:

£2685 ? the £500 lump sum is as well as £250 extra per month.

Ah, ok.

Even £156 from a £500 lump sum sounds wrong if your mortgage will be paid off in 2019, unless your mortgage rate is over 7%

I'm using this calculator http://www.moneysavingexpert.com/mortgages/mortgag...

current mortgage £39.982
remaining term 5 years ( we're on the svr so there is no actual term)
standard monthly payments £503
mortgage type repayment
one off repayment £500
recuring overpayment £250 per month

and it spits out : Overpaying would save you £(2,638) in interest alone,
and mean you pay the debt off in full 1 years & 5 months earlier.

Normally you repay £503 per month. If you overpay a lump sum of £500 and a regular overpayment of £250, you'd be mortgage free 1 years and 5 months earlier. Your total payment over this period would be £32,820.

Your remaining debt
(assuming your interest rate stays the same)
YEAR WITHOUT WITH OVERPAYMENT
0 £39,982 £39,982
1 £30,207 £26,895
2 £21,416 £15,578
3 £13,509 £5,399
4 £6,398 £0
5 £0 £0


One last question , when the mortgage is down to £5000 is it worth getting a 0% credit card and using that to pay off the mortgage?

May as well pay 0% rather than 2.5% although i'm sure it's not that simple.

Edited by egor110 on Friday 22 January 19:09

[CarlosFandango11]

egor110 said:

I'm using this calculator http://www.moneysavingexpert.com/mortgages/mortgag...

current mortgage £39.982
remaining term 5 years ( we're on the svr so there is no actual term)
standard monthly payments £503
mortgage type repayment
one off repayment £500
recuring overpayment £250 per month

and it spits out : Overpaying would save you £(2,638) in interest alone,
and mean you pay the debt off in full 1 years & 5 months earlier.

Normally you repay £503 per month. If you overpay a lump sum of £500 and a regular overpayment of £250, you'd be mortgage free 1 years and 5 months earlier. Your total payment over this period would be £32,820.

Your remaining debt
(assuming your interest rate stays the same)
YEAR WITHOUT WITH OVERPAYMENT
0 £39,982 £39,982
1 £30,207 £26,895
2 £21,416 £15,578
3 £13,509 £5,399
4 £6,398 £0
5 £0 £0


One last question , when the mortgage is down to £5000 is it worth getting a 0% credit card and using that to pay off the mortgage?

May as well pay 0% rather than 2.5% although i'm sure it's not that simple.

Edited by egor110 on Friday 22 January 19:09

Ive worked it out - you've broken their calculator!!!

Your normal payment of £500 per month adds up to 30k over your five year term, which is less than the 40k mortgage you have outstanding, so you can't possibly pay it off over 5 years.

The website can't deal with this and the your saving of £(2,638) is a negative amount, and the results that it has produced are nonsense.

You need to enter a term that is consistent with your normal payment of £503 or the interest rate and 5 years and you'll get some better answers...

[egor110]

CarlosFandango11 said:

egor110 said:

I'm using this calculator http://www.moneysavingexpert.com/mortgages/mortgag...

current mortgage £39.982
remaining term 5 years ( we're on the svr so there is no actual term)
standard monthly payments £503
mortgage type repayment
one off repayment £500
recuring overpayment £250 per month

and it spits out : Overpaying would save you £(2,638) in interest alone,
and mean you pay the debt off in full 1 years & 5 months earlier.

Normally you repay £503 per month. If you overpay a lump sum of £500 and a regular overpayment of £250, you'd be mortgage free 1 years and 5 months earlier. Your total payment over this period would be £32,820.

Your remaining debt
(assuming your interest rate stays the same)
YEAR WITHOUT WITH OVERPAYMENT
0 £39,982 £39,982
1 £30,207 £26,895
2 £21,416 £15,578
3 £13,509 £5,399
4 £6,398 £0
5 £0 £0


One last question , when the mortgage is down to £5000 is it worth getting a 0% credit card and using that to pay off the mortgage?

May as well pay 0% rather than 2.5% although i'm sure it's not that simple.

Edited by egor110 on Friday 22 January 19:09

Ive worked it out - you've broken their calculator!!!

Your normal payment of £500 per month adds up to 30k over your five year term, which is less than the 40k mortgage you have outstanding, so you can't possibly pay it off over 5 years.

The website can't deal with this and the your saving of £(2,638) is a negative amount, and the results that it has produced are nonsense.

You need to enter a term that is consistent with your normal payment of £503 or the interest rate and 5 years and you'll get some better answers...

It's £500 per month plus the extra £250 , so i'm actually paying £750 total a month.

[CarlosFandango11]

egor110 said:

It's £500 per month plus the extra £250 , so i'm actually paying £750 total a month.

You entered a normal payment of 500 per month which the calculator can not cope with.

To get a meaningful answer, you can do as I said in my last post or enter 750 as your normal payment.

Presumably your SVR is 5% or a bit more, then a saving on interest being paid of £130 to £150ish is probably about right then. Might be worth think about re-mortgaging?

Edited by CarlosFandango11 on Saturday 23 January 00:04

[egor110]

CarlosFandango11 said:

egor110 said:

It's £500 per month plus the extra £250 , so i'm actually paying £750 total a month.

You entered a normal payment of 500 per month which the calculator can not cope with.

To get a meaningful answer, you can do as I said in my last post or enter 750 as your normal payment.

Presumably your SVR is 5% or a bit more, then a saving on interest being paid of £130 to £150ish is probably about right then. Might be worth think about re-mortgaging?

Edited by CarlosFandango11 on Saturday 23 January 00:04

My interest is 2.50 not 5 %.

If i put in 2.50 % , over 5 years, with the £500 one off over payment and £250 over payment each month that comes up with:

Overpaying would save you £753 in interest alone,
and mean you pay the debt off in full 1 years & 4 months earlier.
Normally you repay £710 per month. If you overpay a lump sum of £500 and a regular overpayment of £250, you'd be mortgage free 1 years and 4 months earlier. Your total payment over this period would be £41,823.


Your remaining debt
(assuming your interest rate stays the same)
YEAR WITHOUT WITH OVERPAYMENT
0 £39,982 £39,982
1 £32,380 £28,834
2 £24,586 £17,915
3 £16,595 £6,721
4 £8,401 £0
5 £0 £0

The interest saved is a lot less lower than i thought it would be but still on track for getting rid of it by 2019.

Thanks for the assistance.

[DonkeyApple]

If you are going to be over 55 by 2019 then putting that overpayment into a SIPP and claiming your income tax back has to be the best way. It would be simulating an interest rate of maybe 10 times what your mortgage is costing?

[jmorgan]

Not much help and not a financial expert in any way but I found a couple of spread sheets on line (via Moneysaving expert forums as it happens) that gave a better guide than the online generic over payments. But I had to put the full details into that spread sheet, however I could fettle it with any over payments already made and mess around with expected overpayments. It gave me a good insight as to where it was going and when the end was if payments kept up etc.

[egor110]

DonkeyApple said:

If you are going to be over 55 by 2019 then putting that overpayment into a SIPP and claiming your income tax back has to be the best way. It would be simulating an interest rate of maybe 10 times what your mortgage is costing?

I'll be 45 not 55 in 2019