Overpayments question...

lkk88

Hi
Myself and my partner have just got a mortgage and are considering making overpayments to reduce the debt. Our mortgage is repayment and fixed until 2011. The debt we actually pay off in the first few years from our monthly payment is minimal as most is interest so when we look to remortgage our mortgage wont have decreased an awful lot - thats why we want to make overpayments.
This may be a silly question - but do the overpayments we make come straight off the loan itself or will some be taken as interest?
We dont want to make overpayments if its not really going to make alot of difference to our mortgage balance when we come to remortgage.....

Noz

Usually your normal monthly payment will pay whatever interest is due that month, anything over and beyond that comes off the capital balance - you'll need to confirm this with your lender though.

robnye

some mortgage lenders will allow you to overpay by £500 per month (im with nationwide), some will take the overpayment into account immediately (ie reduce the interest portion of the next payment made, others wont change the interest until the end of the year

try asking your mortgage company whether you are allowed to overpay and by how much

lkk88

Hi robyne,
I can make 10% worth of overpayments without being penalised for doing so. I'm with Halifax if anyone has had any past dealings with how they deal with overpayments?
I'm not really fussed whether our monthly payments are decreased due to the interest being cut slightly so if they do its a bonus! I will def add that to the list to ask my lender though so thanks for pointing that out to me!

Dithering_Dad

You tell them that you want the overpayments to reduce the term of the mortgage rather than reduce the monthly payments. It's your choice.

katew87

I over paid in January by £9000 and it saved me £55 in interest every month over 30 years, I think its best to lower your monthly installments but it depends on what you would prefer.

lkk88

i think for us at the moment we would want to reduce the mortgage rather than the monthly payments so we will be in a better position when we come to remortgage.
Thank you all for your advice!!

katew87

Sounds like a good idea