Does Anyone Know What Is Best, I Need Help

chatter-box-charlie

Does anyonw know if it is best to make overpayments per month and reduce the term OR pay a lump sum at the end of each year?

will it make any difference?

tomstickland

It all depends on the relative interest rates. If you can save the money at a higher rate (after tax) than the mortgage then you're best off paying the lump sum. If you're saving rate is less than the mortgage then you're best off overpaying the mortgage.

karom

My theory
- Save for a year every month and make lump sum at the beginning of the year.

Practice:
Well lump sum at the beginning of the year was ~40% of the overall sum allowed so I will be trying for every 2 month lump sum payments while still saving for next year.

jobbingmusician

It also depends on how your mortgage works. It used to be the case (but this may have changed?) that some mortgage issuers would allow overpayments to accumulate , gaining the interest for themselves, and only apply them to the mortgage annually. I think this may have been forcibly stopped, but would check with your mortgage issuer. I do know that some banks calculate a daily basis, and some a monthly, so it might well be important when you make your payments.

lynneinjapan

Daily basis is best, in case you weren't sure - it means that they recalculate how much you owe each day, so it'll change every time you make a payment, rather than only being updated after you've made a year's worth of payments.

chatter-box-charlie

thanks for the advice. When I phoned them all they said was that they would reduce the term for me but any other advice she was unable to give me and I had to speak to a financial mortgage advisor...

Thefunkygibbons

As well as the mortgage t&cs as noted above, it does depend on your circumstances

If you have a rainy day fund, the other consideration is how strong you are

If you can save and not touch it, then fine, but personally I prefer to max out on paying it monthly and then force myself to live on the rest