From: Ronald Raygun 
Subject: Re: mortgage interest again
Newsgroups: uk.finance
Date: Tue, 23 Sep 2003 18:56:08 GMT

Chris Long wrote:

> Ok, I'm referring to the post below regarding mortgage repayments

Below?  Where?

> I basically want to know the quickest and most cost effective way of
> repaying my mortgage.
> 
> Payment per month at the moment is about £850.
> 
> If I increase my payment per month to £1400, and also contribute lump sums
> occasionally, I would be reducing the payment duration by x amount of
> years.

Yes.  Don't tell me you want to know how to work out x.  Because then
I'd have to drone on and on while everybody buries their heads in their
hands thinking "not again!".

> More beneficial interest rates aside, what is the benefit of remortgaging?

None whatsoever, unless you get a change of rules from one which doesn't
to one which does allow you to make unscheduled repayments whenever
you like, and has them credited instantly to the account instead of
at the end of their accounting year.

> If I remortgage with the same repayment date, or even reducing it, how
> does it affect the interest I pay?

If you remortgage (which means change lender) to the same term end
date, with the same interest rate, the payment size, and interest
paid, will remain the same.

If you want to reduce the term, you will increase your payments,
e.g. as you said they might go up from £850 to £1400, and initially
the £850 might be £600 interest and £250 capital, so then the interest
will initially also be £600 (and hence the capital £800), so the debt
will shrink faster (and hence the interest part of the payment will
reduce faster).  Also, since you will make fewer payments, the total
amount of interest you pay over the life of the loan will be much less.