Mortgage calculation question

If he can get a better return than 2.49% (the mortgage interest he's paying) elsewhere, then he should invest the money elsewhere. If he doesn't think that he can do better than that he's best off paying it off his mortgage balance. Simples.
 
grimm said:
If he can get a better return than 2.49% (the mortgage interest he's paying) elsewhere, then he should invest the money elsewhere. If he doesn't think that he can do better than that he's best off paying it off his mortgage balance. Simples.
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Not entirely true. Any interest he would receive would be taxed at least 40% so he'd need about 4.15% to break even.
 
Earns ~£250k+ a year. Struggles with this...

... still takes money off parents.

... worries how many pennies he would save in the grand scheme of things.

Weird. But fair play to the chap.

edit. possibly sly 'I won the lottery' thread.
 
How can someone with a 500k mortgage and earning enough to pay £1900 a month not work this out for themselves?

Or is he the rich/low IQ type?
 
Just to check I'm understanding this correctly - your friend bought a £500k house and over the past 3 years has paid enough to reduce the outstanding balance by £320k? So ignoring interest they're paying somewhere in the region of £9k per month - is there some reason why they've now dropped to just under £2k per month? If they kept up repayment at around £9k per month then they'd be mortgage free within the next 2 years which broadly renders the interest irrelevant.
 
Gruber said:
Not entirely true. Any interest he would receive would be taxed at least 40% so he'd need about 4.15% to break even.
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Not necessarily. It depends where/how it is invested, eg. pension, ISA, OEIC, EIS etc. etc.

If the overall return (net of tax/charges/whatever) of what he invests in is better than the interest he is paying on the mortgage then it is better to invest it. It really is that straightforward.

Of course some people will prefer the security of knowing that they are reducing a debt, but if the OP is trying to do calculations then it would suggest that he probably cares about what is most financially beneficial.
 
Numbers add up much they do not seem...

If he's paid off £320,000 in 3 years thats ~£9000 a month. Yet you say he's paying £1900 a month.

Where did the other ~£250,000 come from?
 
Skeeter said:
Numbers add up much they do not seem...

If he's paid off £320,000 in 3 years thats ~£9000 a month. Yet you say he's paying £1900 a month.

Where did the other £251,600 come from?
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He said he has been overpaying in the OP.
 
Jono8 said:
He said he has been overpaying in the OP.
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If you can afford to over pay £85,000 a year (or nearly 500% on your payment), why the hell do you give a flying **** about saving a little bit of interest?

Actually, why the hell did you take out a 30 year mortgage in the first place?
 
grimm said:
Of course some people will prefer the security of knowing that they are reducing a debt, but if the OP is trying to do calculations then it would suggest that he probably cares about what is most financially beneficial.
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It would suggest this is a lie/show off thread. He's overpaid by several 100k and he's worried about interest on something that is going gob e paid of within 2 years, let alone the 27years remaining.
 
Skeeter said:
If you can afford to over pay £85,000 a year (or nearly 500% on your payment), why the hell do you give a flying **** about saving a little bit of interest?

Actually, why the hell did you take out a 30 year mortgage?
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*shrugs*

Beats me!
 
Skeeter said:
If you can afford to over pay £85,000 a year (or nearly 500% on your payment), why the hell do you give a flying **** about saving a little bit of interest?

Actually, why the hell did you take out a 30 year mortgage in the first place?
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Surely early payment penalties would come into play with such over payments as well?
 
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