Mortgage Overpayments - Lump Sum or Monthly?

kevgibbo

I have recently started a mortgage with C&G and I'm looking to take advantage of the 10% overpayment option they offer.

From what I understand I have two options:
- Increase the monthly amount we pay back (this can be upto double the current monthly mortgage payment).
- Make overpayments during the year in lump sums, allowing upto 10% of the total balance.

What I don't understand is what is the best option? And what this means in terms of reducing the overall total of interest we have to pay back and reducing the length of the mortgage?

mlz1413

Does it say in your mortgage T&C when the interest is affected? All banks and building society differ. But say the interest is re-calulated on the 31/12 every year then you don't have to pay until just before that (make sure you allow for clearing time as funds must be cleared before 31/12)

If interest is recalculated yearly or monthly then that would help you decide when is best to pay.

Another factor is you. How good are you with money - if you save the 'overpayment' values in a high interest account will you spend any of it? Are you going to remember to pay over once a year? If in doubt pay monthly so you can't have that opportunity.

Last factor I can think of it how you get paid, if you get bonuses or commissions then it may be easier to pay lumps off the mortgages as you get a high pay packet.

Double check too that the 10% is of the mortgage value at the start of the loan. Or if it is at the start of each year (I'm assuming from loan start date and not calender year).

ZARA

hi i have this mortgage with c&g, and just paid £4000 yesterday,

basically from the 2 options mentioned above you can do both, i have overpaid 10% of this year as well as doubled my monthly payments,

they wont tell you this but when you overpay a lump sum of your capital they ask you if you want to lower your monthly payments or lower the term of the mortgage, the best one is to lower the term not the monthly payments as this saves more my £4000 saved me a whopping £11000,

the best thing is if for some reason you cant keep up with the overpayment you can call them and tell them you want to reduce the payment that month,

as long as you dont go over the 10% and the double monthly payments you dont inoccur the fees,

but there is a non refundable £10 admin fee for the 10% overpayment, so best to pay it off all in one go,

the 10% is of the remaining balance each year so 10% of 70K is £7000 and then 10% of 63K, and so on,

hope i have covered everything,

also they make you hold on the phone for ages so best thing to do is go to SAYNOTO0870 and get an alternative number, freephone or landline,

best of luck with clearing it im hoping to clear 70K before my 5 year fixed rate is up!

kevgibbo

Great advice, thanks guys. C&G did give me the same info but this was much easier to understand, plus I wasn't sure about potential charges etc.

I'm now paying an extra £500 a month, as far as I'm aware C&G calculate interest daily so this reduces the capital immediately, is this correct? Plus I can still make a lumpsum overpayment upto 10% on top of this before the end of the first year.

formulaonefan

If I understood this correctly, can we overpay monthly (say if monthly payment is £600, we can pay £1200) as well as pay lumpsum of 10% (say mortgage is £100,000 and pay £10,000) at the end of the year?