I have a vague idea that instead of paying into a public sector pension (if the increase occurs) to instead pay off an extra £300 per month (mortgage is £1100 per month over 25 years)

I need to work out how many months it will knock off the term and also how much less interest i will pay over the term.

Ball park figures are about £25k less interest and 5-6 years less term. so in real terms about £100k could be saved up in the term at the end of the new term until the old term would have finished. Does thats ound right? Interest rate is about 4%

just google ‘overpayment mortgage calculator’. There’s loads about that seem to do pretty much the same thing.

Money Saving Expert Version

HSBC Version with swoopy graph

so £90k* saved all in 🙂 and five years early.

*based on finishing 5 and a bit years early 60*£1400 plus the £26k interest saved

i think you’re double counting there. You don’t save both, you just save one of them – the 26k. you also need to bare in mind that money into a pension is pre-tax, into the mortgauge is post-tax, possibly making a 40% difference into the amount (ie £300 into the pension is only £180 on the mortgauge).

paying off a mortgauge early is a good idea, but not necessarily better than a pension

i save teh cash but it gives me 5 years to save up what i WOULD have spent on mortgage payments

We are currently overpaying on our mortgage while the interest rate is low. I think that it’s currently about 2.7% (it’s split over 2 mortgages, so I don’t know what the combined amount is exactly).

If things stay as they are, we will pay it off over 8.5 years early and save £18k in interest.

I am not sure if it’s the best use of the money, but I suspect that it is.
I just hate the idea of such a large amount of money being owed, so want to do all that I can to get it down as fast as possible.

Phone your mortgage provider they will tell you. Nationwide are very helpful, 500 overpayment is approx 3 months reduction in term for me. I am reducing mortgage because at some point rates are going to have to rise. Imagine your repayments at 9 or 10%. Scary.

i save teh cash but it gives me 5 years to save up what i WOULD have spent on mortgage payments

you’re still double counting. If you want to say ‘if instead of my pension I put an extra £300 into ‘a place’ for 25 years’ then you are the 5 years x £1400 better off. You could also count interest you would earn on that much money, but you can’t claim the interest saved on the mortgauge (as that makes up a portion of the 5 years x 1400 anyway)

its also worth looking at how much money a pot would be ‘worth’. 60 months of £1400 is ~85k. That would give you (if you’re single) an annuality of about £3000 a year. I wouldn’t mind betting the public sector pension would give you more

I’ve written one for when I did our mortgage, I use it to investigate certain scenarios. I’ve put it on google docs so you’re welcome to it if you think it’ll be useful. You’ll need working knowledge of excel type spreadsheets though. I think it’s relatively straightforward from the looks of it…

can i have a copy please – share with cruz.heckler@gmail.com

cheers

Ball park figures are about £25k less interest and 5-6 years less term. so in real terms about £100k could be saved up in the term at the end of the new term until the old term would have finished. Does thats ound right? Interest rate is about 4%

Nope, not right.

You’ll have spent an extra , say, 20 years * 12 months * £300 overpayment = £72,000 to pay off the mortgage early. Subtract that £72k off your notional £100k savings to see how much you’d probably save (ie. basically the interest).

Also subtract the loss to your pension when you retire.

you seem to be misisng the point – the actual mortgage i save 26k and 6 years. When i finish paying the mortgage i can save £1400 a month for those six years so i will have savings of £10800 in the bank when my old mortgage would be due to run out plus the £26k saving on the mortgage

I have created the ultimate mortgage calculator spreadsheet* – deals with offsetting and overpayments, giving returns based on your tax band. I’ve given it to a few off here in the past. Anyone want it?

*Probably

surely its a no brainer, or am I missing something ❓

A contributory pension (10+%) + the Tax relief will win every single time
No?

you seem to be misisng the point – the actual mortgage i save 26k and 6 years. When i finish paying the mortgage i can save £1400 a month for those six years so i will have savings of £10800 in the bank when my old mortgage would be due to run out plus the £26k saving on the mortgage

but you won’t. at the end of the 6 years you’ll have £100800 in the bank. Of that, £26,000 will have come from interest saved (I think the figure is actually closer to 10k), the rest will be there because you’ve been putting £300 a month extra into your account. £300*25*12=£90,000

you seem to be misisng the point – the actual mortgage i save 26k and 6 years. When i finish paying the mortgage i can save £1400 a month for those six years so i will have savings of £10800 in the bank when my old mortgage would be due to run out plus the £26k saving on the mortgage

‘fraid not buddy. You need to ignore the fact you’ve “saved” £26k on the mortgage. That would have been paid with the 6 years x £1100 a month repayments you’ve avoided paying by repaying early.