honoluluwindow
New member
I have read many a comment over the last few days that have made me question the overpay v save debate.
My understanding was that the overpayments are affecting interest on a larger debt balance whereas the savings compound from a smaller balance hence it is better to overpay.
I input an example in the MSE overpayment calculator:
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/
I chose a £180k loan, 25 years, 3% rate, £4,800 annual overpayment, 4.5% savings account rate.
It tells me that the loan gets paid off 10 years earlier so total duration of 15 years.
The interest saved is £31,559 vs earned in savings of £30,951 resulting in a net £608 gain for overpaying.
I chose 4.5% to illustrate a higher difference between rates still resulting in overpayments being favourable.
Am I missing something here? Is the MSE calculator wrong?
I also want to point out that I and the MSE calculator are looking at the impact up to the point the mortgage is paid.
I have also used the UKPF calculator which unless I’m using it wrong suggests it’s better to overpay.
My understanding was that the overpayments are affecting interest on a larger debt balance whereas the savings compound from a smaller balance hence it is better to overpay.
I input an example in the MSE overpayment calculator:
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/
I chose a £180k loan, 25 years, 3% rate, £4,800 annual overpayment, 4.5% savings account rate.
It tells me that the loan gets paid off 10 years earlier so total duration of 15 years.
The interest saved is £31,559 vs earned in savings of £30,951 resulting in a net £608 gain for overpaying.
I chose 4.5% to illustrate a higher difference between rates still resulting in overpayments being favourable.
Am I missing something here? Is the MSE calculator wrong?
I also want to point out that I and the MSE calculator are looking at the impact up to the point the mortgage is paid.
I have also used the UKPF calculator which unless I’m using it wrong suggests it’s better to overpay.