Explain this to me because I'm really thick when it comes to mortgages...

[YellowRedBlueGreen]

I took out a 35 year mortgage in 2019, now down to 30 years thanks to some overpayments. I've always focused more on savings and have mainly put spare money in that because I'm the "what if" type of person who worries about not having most of my money there to use if I were to become unemployed etc. But now that this interest nightmare is happening I'm thinking, if my new job (starting next month) goes well I will give it six months to feel stable then throw a massive chunk of my savings at the mortgage - the amount I'm allowed to overpay per year. It will knock nearly 4 more years off and I'll still try to have a decent amount for an emergency new boiler or whatever in my savings... my savings account generates basically zero interest and according to Martin Lewis (in my situation) overpaying is best. I'm fixed until 2026 so ideally if possible I'll throw as much money at the mortgage as I can until then. But when I do come to remortgage in a few years, other than the outstanding amount being lower than expected how will I benefit from this? If at that point it's still gone up to 6% the monthly repayments will still be as extortionate as they would be if I'd not overpaid at all, is that right? Or not? Sorry if I'm being a bit dense I really don't understand all this grown up stuff!

And more to the point who the Heck takes out a mortgage without understanding how it works.

Oh fuck off!!

And more to the point who the Heck takes out a mortgage without understanding how it works.

Er.......because there are so many other options for buying a house? She understands robbing a bank better.....would that be a better option? FFS I agree with @YellowRedBlueGreen - fuck off.

And @Spectre8 can you not see, sometime we get the overall idea...but if we are weighing up a decision (savings vs overpayment) we want to understand it more in depth.

If not saving extra makes @YellowRedBlueGreen feel uncomfortable, she wants to have the cold hard figures in her head (paper/pencil/"I have worked this out") to help her square her decision. Or it she is not going to be able to afford the holiday/trip/renovations planned because she is prioritising overpaying...it helps to understand why with facts....such as I will be saving £7000 in interest...it is worth it.

She said she didn't understand. Many people have reassured her it is actually quite complex - but the online calculator can help. And actually trying to work it out with pencil/paper is difficult.

Some fuckwits have piled on calling her all kinds of names.

I know who I think less of. And it isn't the OP for asking the question. Want to know the answer. Trying to understand..

It is the fuckwits.

NatWest have a really good
Overpayment calculator

Which illustrates how much you can save in interest/years or how much your repayment will reduce.

We have calculated we get a 33% return (in interest saved) on our money by overpaying, compared to earning 2% interest in a savings account.

You might find it interesting to look for a compound interest tutorial aimed at explaining the concepts, but for the real numbers the calculators make life so much easier. Don't forget that the rates are annual so on your 100k 5% example, 5k is the interest for the first year only. So each year you reduce the term makes a big difference.

Make sure you check the terms of your mortgage re overpayments. Although many of them allow overpayments of, say, 10% of the original sum borrowed, some of these state that you can only make the appropriate overpayment on a monthly basis rather than in one large chunk.

Mortgage interest is single and not compound - you don‘t pay interest on the interest whereas savings interest with the interest left in the account is compound.

Therefore, if you could get an equal interest on your mortgage to your savings, you would get more saving.

The important thing is though that a mortgage is secured against your home and your home is at risk if you do not keep up repayments.

Someone upthread said they want to keep a mortgage so they have more costs if they need benefits. Wrong way round. You want to have a safe place to live when you are told you are not entitled to enough to buy food and heat.

Also, there is no life insurance included on either interest or repayment mortgages.

😊if your fixed is up, you could look at an offset mortgage. So I have around 60-70k with the same bank as my mortgage, my savings are used as if they are paid off the mortgage however they can be used if needed

I've been looking on here it gives ideas of what deals are about and how much they will cost etc..

https://www.moneysupermarket.com/mortgages/?gbraid=0AAAAAD4DchAeGdP2rajLJtjavQ4hTnzZ&p=0&source=GOO-0X000001E809DB68C9&gbraid=0AAAAAD4DchAeGdP2rajLJtjjavQ4hTnzZ&gclid=EAIaIQobChMIbPbvbnI-gIVDrrtCh0nKQEQEAAYASAAEgJYIID_BwE&gclsrc=aw.ds

If you tell your mortgage company you want to make a 10% overpayment, they ask you if you want to use it to reduce the amount you pay each month or pay the same each month but reduce the term ( so the mortgage gets paid off in fewer years).
If you can afford to keep paying the mortgage at the normal rate, it’s better financially to opt for fewer years.

Lol I'm not the who doesn't understand my mortgage but thinks they will be able to calculate all the scenarios with pen and paper accurately.

Dont be a luddite, just use the tools available. Afterall at least they understand how to work it all out for you.

Just bumping this so it goes to the top of my watch list.