Leeds BS - no overpayments but can triple DD?

turtlemoose

Hi, I have a mortgage with Leeds Building Society, currently outstanding around £46k, fixed rate until 31/07/10 at 6.59%, repayment currently £327.22 a month, 24 yrs left

My mortgage is very strictly no overpayments whatsoever, apart from totally paying it off in one go (which would cost nearly £2k in early redemption charges). However, when I have just rung them to change my direct debit date (work pay date is changing), the woman on the phone has advised me I cannot overpay however I can increase my direct debit by any amount I want up to £999.99 a month wihtout incurring any charges...

They only take the £327.22 per month as a payment against the interest and capital, but they hang on to the extra and then pay it off as a lump sum off the capital at the end of the year (ready for the January statement).

So firstly, am I right in thinking this is a loophole that in essence allows me me overpay??

And secondly, I am saving £335 a month out of my salary, but earning pittance in interest as rates are so low (oh and i've already got £3k in a rubbish account that is now being transferred £300 per month in to the Saffron 7% isa)..... so really what I want to know is which is better, pay my £335 in to the rubbish savings account, or raise my direct debit and then have a capital overpayment done in dec/jan?

thanks in advance guys!

Kaz2904

You need someone with a bigger brain than mine I'm afraid!
I use the calculator on www.whatsthecost.com and run all my scenarios through there.
Do be aware that you aren't actually saving anything for the whole year though because it is not applied to the balance owing. Can you shorten the term?

Trying_to_be_good

Kaz's brain is doing just fine!

You won't see the financial benefit of the overpayments until they're actually applied to the account at the end of the year. But they won't let you pay off a lump sum if you saved it (e.g. monthly/regular saver) elsewhere.

As it's only just over a year until your fixed rate ends, and presumably then you can pay off unlimited lump sums, I'd be inclined to go for one of the regular savers (Barclays/Halifax are the highest payers, I think, but check on the savings forum) and stick you monthly extra payment in there, paying off a lump sum when your fix ends.

dimbo61

Yes barclays regular saver paying 6% before tax £250 a month max and in a year you could pay £3k plus interest off the mortgage.

dimbo61

Both you and the OH can open an account and if you do want to overpay do it in december/ jan payment !

turtlemoose

thanks guys. Unfortunately I'm an idiot and opened the Halifax regular saver and forgot to set up the standing order in time so it reverts to the rubbish account :-/

dimbo, i can't overpay until Aug 2010, so really i'm trying to work out if it is better to use the increased direct debit so that essentially I can make an overpayment off the capital in December, rather than waiting an extra 8 months - at the mo it's roughly £260 a month in interest (omg!) so i'm more inclined to think that this early overpayment would be better as i can't earn as much interest in a savings account VS a lump sum off the capital 8 months early?

kaz, at the mo I don't want to shorten the term as it is shared ownership with funny rules applied to everything! I'm hoping to buy the other 50% (with my partner) when the fixed rate ends in Aug next year, and get a 'proper' mortgage...and a better interest rate too!!