Overpayed and the monthly payment didn't go down as much as I thought it would?

pstones578

I have 23 years left on a mortgage. Payments 889.90. Made an overpayment of £2,500 off the capital. Payments went down to £885. Should it not have gone down a little more? I thought if I do 23 x 12 x £4.90 that should equal more than what I've overpaid?

zekepes

If you made a payment off the capital then you will pay your mortgage off before your term finishes. The figure you are now paying will be a bit more off the capital than before as you are now paying a bit less interest.

You can make overpayments to reduce the actual amount you pay each month and keep the term exactly the same effectively (we mistakenly did that the first month). Now we pay it so that our mortgage payment doesn't change.

I am not 100% sure about this btw!

Coud the £4.90 be due to an interest rate change?

pstones578

zekepes wrote: »

If you made a payment off the capital then you will pay your mortgage off before your term finishes. The figure you are now paying will be a bit more off the capital than before as you are now paying a bit less interest.

You can make overpayments to reduce the actual amount you pay each month and keep the term exactly the same effectively (we mistakenly did that the first month). Now we pay it so that our mortgage payment doesn't change.

I am not 100% sure about this btw!

Coud the £4.90 be due to an interest rate change?

I asked them to pay it off the capital and I asked them to keep the term the same and reduce the payments but they have come down to nowhere near what I expected. I'm going to give them a call today and ask how it works. I'll post back here with the results. I'm with NR by the by...

Kaz2904

Have you tried running it through a calculator to see what it ought to be?
Another thing (that I'm sure you checked), are you allowed to make overpayments without penalty?

As an aside, overpaying by £2500 and reducing your monthly payment is a very expensive way of doing things, you are effectively paying the same amount of interest. You would make more money by having it sitting in a savings account.

pstones578

Kaz2904 wrote: »

Have you tried running it through a calculator to see what it ought to be?
Another thing (that I'm sure you checked), are you allowed to make overpayments without penalty?

As an aside, overpaying by £2500 and reducing your monthly payment is a very expensive way of doing things, you are effectively paying the same amount of interest. You would make more money by having it sitting in a savings account.

The way I'm going to do it is reduce the payment (that I HAVE to pay) but pay it anyway by increasing my overpayments? That way if the stuff hits the fan I can stop all overpayments and am committed to less I have to pay back.

Kaz2904

Ah, I see! That's ok then!

pstones578

Kaz2904 wrote: »

Ah, I see! That's ok then!

Reason it did not go down much is that some of it went to fee's that we had added to the mortgage. Next time we pay £2,500 off it will knock £15 per month off.