Capital Reduction Or Monthly Overpayments?

whatdoiknow_2

Hi, which is more cost effective- making lump sum capital reduction payment every 3 months or so or just increasing the monthly payments? Thanks

StuartGMC

It depends on how your mortgage is calculated (daily, monthly or annual interest charges) and whether the lender will charge you for the lump sum capital repayment, but, if paid monthly as an OP it would not incur a charge?

Check the T&C on your mortgage and ask about the interest calculation.

whatdoiknow_2

Thanks for your reply - In answer to your queries - the mortgage interest is calculated on a daily basis and I can overpay by 10% every year. So should I increase my direct debit or just pay the extra in lump sums every few months? thanks again.

CLAPTON

The earlier you make a payment then the more interest you avoid paying unless of course you can make more interest saving than you arre paying on the mortgage

dimbo61

As soon as you get paid and have set aside money needed to pay all the other bills and living costs pay any extra you have spare off the mortgage as your interest is calculated daily !
If you increase the direct debit by what you can afford it will be done for you each month.
Divide the outstanding mortgage balance on the 1-1-2009 by 10 to get 10% then divide that by 12 to get the maximum you can pay off each month.

maz1964

hiya i have an abbey mortgage variable,

now on a interest only and didnt want to go to part int part capital yet as just recovered from the arrears i had and ive asked if i could overpay weekly, but ive been told that they can accept payments min 500.00 and should be expressed as a capital payment thus the remaining capital amount will be reduced, now they didnt say how many times but i thought i could also overpay 10% so i will relook into this further, glad im not the only one now thinking like this,,,lol

good luck and call your mortgage company and get them to confirm in writing exactly what you can do and how and when

regards maz