It may be that i can pay off the balloon payment to keep my car in October. Im questioning whether instead i should get a loan for that and pay the money off the mortgage instead. Interest rates are comparable on both.
I feel i should pay off the car, and my reasoning is:
a) it’ll be mine, no one can take it away.
b) once paid i can add the monthly amount im paying on pcp now to overpay monthly on the mortgage
c) we are in the house for the long term, other than paying off the mortgage quicker ive no other reason to reduce it
d) i become in a “cash” position with the vehicle
e) should something happen and i need to reduce the mortgage overpayment i can, but I’d not have that flexibility with a loan for the car
f) the baloon is slightly less than current market value of the vehicle
But somethings nagging at me that paying the amount of the mortgage is “cheaper” becuas of the loan duration.
what say the stw gurus?
If you make a lump sum payment against your mortgage and keep your monthly repayments unchanged, how much will that reduce your mortgage term and - more importantly - how much will you save in interest payments?
That, to me, is the key question.
If you are planning on keeping the car 'till it dies then pay it off. If not then use your other PCP options and pay off a chunk of the mortgage. Just make sure there are no penalties paying off a lump sum.
If the rates are similar it will save you more money reducing the loan with longest term. Likely the mortgage?
Last 3 posts have it, whats saves more money? I need some kind of calculating spreadsheet!
Talk with your mortgage provider; ask them to calculate the effect of lump sum payment in October and keeping monthly repayments unchanged.
Specifically, as my post ^^^, you want to know:
- how much earlier will you clear your mortgage
and
- how much you will save in interest
You can estimate this but unless you know how interest is calculated and when it is applied you'll need to get reliable accurate information from your lender.
Don't forget to check that they allow lump sum payment; in addition Bank of England are indicating interest rate increases.
Will do, thanks for the advice .
I would have thought that if the rates are the same then as the mortgage loan is over a longer period, paying that down will save more money.
Well there you go. Pay it off the mortgage saves £4k interest and its paid off 11 months earlier. Cost of the car loan over 5 years is £700 interest so a net gain if you like of £3.3k and nearly a year reduced.
Whoop.