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worth overpaying on mortgage?

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  • 10-06-2012 8:09pm
    #1
    Guerngirl
    Registered Users Posts: 24 ✭


    hi, paying a mortgage on a house - eur 500,000, 30 years left. is it worth overpaying? i'm on tracker 1.5% above ECB, considering overpaying by EUR 600 a month. how quickly could i pay off mortgage - considering rate staying at 2.5% in theory. thanks


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    #2
    rcdk1
    Closed Accounts Posts: 558 ✭✭✭rcdk1


    Guerngirl wrote: »
    hi, paying a mortgage on a house - eur 500,000, 30 years left. is it worth overpaying? i'm on tracker 1.5% above ECB, considering overpaying by EUR 600 a month. how quickly could i pay off mortgage - considering rate staying at 2.5% in theory. thanks
    According to the mortgage overpayment calculator linked below you would knock 9.2 years off your mortgage and save €69,847.91 in interest repayments.
    http://www.whatmortgage.co.uk/mortgage-calculator-what-if-i-over-pay-my-mortgage/


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    #3
    Milk & Honey
    Banned (with Prison Access) Posts: 1,950 ✭✭✭Milk & Honey


    Yes, you should overpay if you can afford to. 30 years is a very long term for that sort of a loan.
    I assume you are paying about 2k a month at a rate of 2.5 % with 30 years to go. Adding €600.00 would shorten the repayment period by about 10 years. It would be about 236 months to go as opposed to 360 months.


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    #4
    riclad
    Registered Users Posts: 8,184 ✭✭✭riclad


    Depends if you are on a high salary, you save on interest payments, you pay less interest ,And you gaurd against a rise in interest rates.
    Say you pay off ten years early, thats ten years interest you save.
    First ten years of loan ,most of your monthly payment is interest.
    ie at some point interest rates will go up.
    MY friend has 70k mortgage,paid approx 65k interest in the 1st ten years of loan.loan taken out 2002.
    if he paid off loan in 15 years vs 25 years,he,d save at least 60k.
    on the bank statement,it says he has 69k approx left to pay,
    ie still owes 69k, total payments on loan will be about 140-150k, presuming interest rates stay at 3.5 per cent for the next 15 years.
    Which is unlikely.
    SAY you paid double, per month, you,d reduce loan length, 50 per cent,by
    15 years,
    so saving= your mortgage standard payment x 12 x15 =
    total money saved,
    if interest rates stay at the present rate,
    very unlikely.
    Whats your standard payment per month right now.
    as above ,its a good idea to overpay,if you can afford it.


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    #5
    StillWaters
    Closed Accounts Posts: 1,799 ✭✭✭StillWaters


    Personally I wouldn't overpay. That's a cheap tracker you have, you would get a better return saving in a high interest account.
    You would need to be very disciplined though and lock the savings away and not touch them.


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    #6
    ongarboy
    Registered Users Posts: 5,201 ✭✭✭ongarboy


    Because banks are trying to wean customers off trackers due to them being loss making, I'd also check your terms and conditions to see if you lose the tracker rate if you opt for any other prepayment method other than the calculated monthly over 30 or 35 year period you committed to. Maybe your bank will be delighted for you to up the payments if it means getting you off their books quicker!

    If you can afford it, I would recommend you pay the extra. These days it seems using up your euros instead of keeping them in a bank with all the uncertainty about the future of the euro seems like a wise choice.


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