Overpayment calculator

hornetstinger · 8 Mar 2018 at 20:15

Using overpayment calcuator in a app is this right? I pay 10% per year of remaining, shortening it by years and paying several thousand less in interest.

Can you pay 10% pretty much within first month after the first payment goes out?

Syla5 · 9 Mar 2018 at 11:27

There's a few things to consider here.

Is it 10% per year of the anniversary balance or 10% of the original loan.
Example my current mortgage is 10% of the anniversary balance, the mortgage I am moving to is 10% of the opening balance so while the first decreases the second stays fixed.

Generally speaking overpayments are for a given period and you will only trigger charges if you go over your entitlement in the period, so yes you can pay your 10% overpayment all in one go.

As for saving thousands on interest that's not really going to be the case. Doing some rough calculations I have assumed an 11 year period at 1.29% based on payment amount and principal. This would mean £3.8k total interest over the period, if you retained the same rate.

Adding in your planned overpayments you will save around £2k in interest, but you need to factor in what interest you would be able to earn on the money if it was in fix rate bonds/ISA's etc and off set that.

At the end of the day, overpayments while rates are low is the best low risk way to benefit. Also means your mortgage gets paid off a lot sooner, in the example given its 7 years instead of 11 with your plan.

Peerzy · 9 Mar 2018 at 11:36

Download this calculator and run your figures through it, it's much more detailed and will cover everything.

http://www.locostfireblade.co.uk/spreadsheet/Index.html

hornetstinger · 9 Mar 2018 at 12:41

It's a nationwide, 10 year fixed rate

There's this

Syla5 · 9 Mar 2018 at 13:33

I am moving to nationwide, check your terms as all the nationwide mortgages I checked out were 10% of the opening balance per year which means if you have the capacity to, you can overpay by £5.2k per year, not the decreasing amount. Also if you plan on paying it off so quickly then consider a 5year fixed, cheaper on interest and you can in theory still be paid off. Remember as soon as you end a mortgage term you can lump sum as much as you like as you are no longer stuck with ERC charges, which on the 10 year deal you will be until the 10 years is up.

Edit: Just ran this through the calculator and you would indeed be paid off in less then 5 years if you could overpay at the same level as your first planned overpayment, so go for a 5year fixed with a lower interest rate if feel confident you can stick to your plan.