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Repayment Calculation on Discounted Variable Rate

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  • 10-08-2015 3:07pm
    #1
    blueredface
    Registered Users Posts: 61 ✭✭


    Hi there,

    I have a query regarding mortgage repayment on variable rate:

    Bank agreed 22 years of repayment of 70k payment.
    I have mortgage approved with x percentage (Less than 60%) of total property value and will be on discounted variable rate (3.80%) which allow me for Regular overpayments (Monthly) and/or also lump sum payments if I want to pay back quickly.

    I am not sure but have intension to clear the loan in half duration (11 years if things goes smooth). Which option will help me best to avoid maximum interest charge.

    a) A regular Monthly overpayment or
    b) If I save the money say for 6 months/12 months & then pay lump sum?

    My calculation is not great but If any of you who has calculation skill, please help how can I avoid maximum interest for this amount and how much I have to pay back of original loaned amount in half duration agreed (11 years)

    Thanks and best regards.


Comments

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    #2
    sKeith
    Closed Accounts Posts: 13,404 ✭✭✭✭sKeith


    A over B.
    B is only better if you have a savings account that pays you more than 3.8%
    Best if you hold onto a rainy day fund, as once you overpay, you can't get that money back.


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    #3
    blueredface
    Registered Users Posts: 61 ✭✭blueredface


    sKeith wrote: »
    A over B.
    B is only better if you have a savings account that pays you more than 3.8%
    Best if you hold onto a rainy day fund, as once you overpay, you can't get that money back.

    Thanks skeith but my query is still unanswered how much I can save in interest if I pay double of my monthly mortgage premium?


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    #4
    sKeith
    Closed Accounts Posts: 13,404 ✭✭✭✭sKeith


    I just ran it through an overpayment calculator. if you double pay per month, the loan will be repaid in 9 years, and it will save you €21000 in interest.
    you can run these things through a mortgage overpayment calculator.
    http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#results

    Ignore £ or €. that maths works the same. Just use you figurers as 1:1 €:£


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    #5
    Aimead
    Registered Users Posts: 184 ✭✭Aimead


    Sounds like a Project Maths problem.

    Assuming you borrowed 70K and would be paying equal monthly instalments for 22 years (264 payments) at a yearly rate of 3.8% this should be about €389.25 a month.

    To pay this off in 11 years (132 payments) at the same 3.8% yearly should be about €647.50 a month.

    As sKeith says, paying off immediately will result in a lower overall payment but you need to make sure you aren’t relying on the money.


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