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Mortgage Overpayment



Description:  This calculator shows the effects of overpaying a mortgage, in reducing the term and the effective cost overall. The actual payment made each month is taken to be the sum of the normal 'Repayment Mortgage' payment for the term chosen (as reduced by any prior overpayments)  -plus-  the stated overpayment (increasing on each anniversary, if this option is chosen),  --subject to--  any minimum given for the overall payment (again increasing on each anniversary, if this option is chosen).
[If your normal monthly repayment is not re-calculated for earlier overpayments, so that past overpayments reduce the term rather than reducing future payments, then enter the 'Minimum' as the initial level of normal payments plus your chosen overpayment.]

The 'Discount Rate' is used to allow for the time-cost of money, in the "Effective Overall Cost (Present Value of all payments)". This can be thought of in two different ways:- (A) An allowance for inflation : if you enter 4% then 104 to be paid in 1 year's time is considered equivalent to 100 paid today;  -OR-  (B) An allowance for net interest foregone : for instance, if instead of making an overpayment of 100 today, you placed that amount into a savings account receiving 4% net interest, then you'd be able to pay-off 104 in a year's time (so paying-off 104 after a year is considered equivalent in cost to paying-off 100 now).



INPUTS:

 Outstanding Mortgage Amount :-   
  
 Interest rate (%) :-   
  
 Remaining Term 
 (defaults to 25yrs if left blank) :-   
  
  
 Monthly Overpayment :-   
  
 Minimum Monthly Payment :-   
  
 Escalation rate on Overpayments & Minimum (%) :-   
  
 Discount rate (%) for time-cost of money (defaults to 4% if left blank) :-   
  







RESULTS:

  'Interest-Only', No overpayment:-    'Repayment', No overpayment:-    'Repayment', With Overpayments:-    
 
 Starting payment rate (per month) :-   500   644   744    
 Ending payment rate (per month) :-   500   644   744    
 Actual Term :-   25y  0.0m    25y  0.0m    18y  7.4m     
 Total payments over term :-   250,000   193,290   166,252    
 Effective Overall Cost (Present Value of all payments) :-   131,575   122,065   117,108    




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