Making a lump Sum Payment to a Mortgage
An increasing number of flexible mortgages allow the homeowner to make lump sum payments, thereby enabling a reduction in mortgage capital.
The benefits of making a lump sum payment to a mortgage include:
- Own a higher % of the house - makes it easier to remortgage
- Reduce the mortgage term, enabling you to live rent free earlier
- Save on the total cost of paying the mortgage.
The benefits will be greater if:
- Interest rates are high.
- The longer the mortgage term.
See also:
Example 1 Mortgage balance: £120,000: Interest rate: 6.5%. Mortgage Term left: 25 years
| Lump sum deposit | Monthly Payment | Total Cost | New Total cost after deposit | Total Saved | New time Span |
| £2,500 | £810 | £243,074 | £234,142 | £8,900 | 23.8 years |
| £5,000 | £810 | £243,074 | £226,000 | £17,054 | 22.7 years |
| £10,000 | £810 | £243,074 | £211,796 | £31,277 | 20.8 years |
| £15,000 | £810 | £243,074 | £199,759 | £43,317 | 19 years |
Example 2: Mortgage: £150,000 : Interest Rate 8%: Mortgage term left: 25 years
| Lump sum deposit | Monthly Payment | Total Cost | New Total cost after deposit | Total Saved | New time Span |
| £2,500 | £1,157.72 | £347,317 | £333,595 | £13,721 | 23.8 years |
| £5,000 | £1,157.72 | £347,317 | £321,256 | £26,060 | 22.7 years |
| £10,000 | £1,157.72 | £347,317 | £299,904.73 | £47,412 | 20.9 years |
| £15,000 | £1,157.72 | £347,317 | £282,019 | £65,297 | 19 years |
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