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.

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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