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Am I missing something?
Did you work it out with compounding mortgage interest?
ie. the 2% over 25 years.
hippy-
Worked it out at 18 years (my mortgage period) and 2.25%.
Overpaying £500 a month would save interest of ~ £15k (and mean that the mortgage was paid off in 11.5 years).
Investing £500 a month at 5% compounding for 11.5 years would generate interest of ~£24.5k.
I've just discovered that this spreadsheet has a nice option for comparing savings to overpayments http://www.locostfireblade.co.uk/Downloads/MortgageSpreadsheet/Mortgage%20Schedule%20Calculator.xls
aggi
I did a spreadsheet a while back on whether overpaying or investing was a better deal. Position then was that investing seemed a better option.
Nutmeg stocks and shares ISA has been returning 5-6% per annum (after fees) whereas my mortgage interest is about 2%.
Obviously the issue here is whether the mortgage rate is going to shoot up. If that is the case then I can dump the ISA into overpayments on my mortgage to negate that and cut the capital.
Aside from the above, I preferred ISA to overpayments as it left the cash more accessible in case of emergency.
Whether or not Nutmeg is the best option, the fees are high but the return is good for minimal effort (all I do is transfer money in each month). There are probably better options out there but I'm lazy and there is obviously a point where the time I spend on it cancels out the extra money.