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Mortgage overpayments question

Last post Sat, Oct 12 2013, 2:19 PM by Chris Hgv. 4 replies.
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  •  Sat, Oct 12 2013, 2:19 PM

    Re: Mortgage overpayments question

    Cheers Zeb. Good advice.
    • Post Points: 5
  •  Sat, Oct 12 2013, 8:25 AM

    Re: Mortgage overpayments question

    Yes, definitely part 2.

    Each time you make a payment this means that the balance will have £200 less on which to pay 4.25%, and then next month you would have this reduced figure again on which to pay 4.25% less. You will slowly create a snowball effect, each time the balance reduces there is less exposure to interest and this means that the same payment will slowly reduce the amount of interest paid but increase in the amount paid off the balance and with more paid off the balance each month the amount of interest repaid back to the lender reduces even further allowing you to reduce the term of your mortgage along with reducing the amount of interest repaid.

    Doing some quick calculations I get this to give you a reduction of around 7 years and around £19,500 if you over paid by £200 per month for the remainder of the mortgage

    • Post Points: 50
  •  Fri, Oct 11 2013, 7:24 PM

    Re: Mortgage overpayments question

    Thanks for the reply. Appreciated.
    • Post Points: 20
  •  Fri, Oct 11 2013, 3:39 PM

    Re: Mortgage overpayments question

    Note: I am no expert.

    Both Sums are roughley equivelant with little difference in size, However the second loan being almost 3 times more expensive to repay would be my choice to reduce first.

    when I am confronted with these types of problems I use an excel spreadsheet to calculate the overal cost, in fact if you google for it there are plenty of loan calculators on line you can use to enable a comparison to be made.

    • Post Points: 38
  •  Fri, Oct 11 2013, 1:57 PM

    Mortgage overpayments question

    Hi,

    Please could someone answer my mortgage query...

    I have one mortgage on my house that is split into two parts as follows;

    1) approx 100,000 remaining. 22 yrs, 09 months remaining. Was fixed but fixed period ending. Now tracks B of E + 0.75% (ie 1.25%). This is approx £420 per month.

    2) approx 94,000 remaining. Same term remaining. Again fixed period ended but B of E + 3.75 (ie 4.25%). This is approx £525 per month.

    I want to make overpayments of £200 per month. There are no charges for any overpayments.

    Where is it better to put this £200 per month? I initially thought in part 1 as it's a bigger loan remaining, but would it be better to put in part 2 which may cost me more in the long run when interest rates go up.

    Thanks in advance.

    Chris
    • Post Points: 20