not worth overpaying?

everythingshouldbefree

i paid my mortgage payment over the phone today and thought id ask about overpaying(any charges ,limits etc) and the advisor told me its not really worth me doing it on my type of mortgage(repayment).i'm not up on the different types of mortgage and was just wondering if she was just saying this to keep me paying just my normal payment for thier benefit rather than possibly bringing down my balance for my benefitthanks.

ecoelle

I don't know a huge amount about different mortgages, but, interest gets charged daily, sso it stands to reason the quicker you pay it off the less you will pay over the term of the mortgage, so you win and the bank loses. I think they just want to make more money out of you, do not fall for their lies

dylansmum

Hmmn. That does not sound right - but perhaps more details needed for folks here to comment. Mine is a repayment and allows a 10% overpayment with no penalties. Using snowball calculator shows how much debt can be cleared as you start to bang off interest and captial, thus interest proportion reduces and you reduce mortage term.

I am going to be doing this!

everythingshouldbefree

thanks,thats what i thought,paying more off has got to be better hasnt it????.doesnt it make you hate them even more when they try it on like that!:mad:

blueberrypie

everythingshouldbefree wrote: »

i paid my mortgage payment over the phone today and thought id ask about overpaying(any charges ,limits etc) and the advisor told me its not really worth me doing it on my type of mortgage(repayment).i'm not up on the different types of mortgage and was just wondering if she was just saying this to keep me paying just my normal payment for thier benefit rather than possibly bringing down my balance for my benefitthanks.

Is it an offset mortgage? In that case she might have a point, in that any money sitting in the linked bank account is saving you just as much mortgage interest as if you'd overpaid by that amount.

But otherwise...most likely the advisor just doesn't understand how it works. Go and put your figures into the Egg calculator and see how various kinds of overpayments affect what you pay overall.

everythingshouldbefree

not an offset one just ordinary repayment.ive run the figures before and just £50 or so makes quite a bit of difference as you all know

RosieTiger

everythingshouldbefree wrote: »

not an offset one just ordinary repayment.ive run the figures before and just £50 or so makes quite a bit of difference as you all know

"they would wouldn't they"

RosieTiger

No mortgage lender is doing it for altruistic reasons - they want to make money so the longer you take to pay it, the more they make !

StuartGMC

There has been plenty of publicity in the media about people over-paying and I thought even the CML (Council of mortgage lenders?) had commented it was a good thing for people to do with record low interest rates.

Even on an offset it is worth doing as you must balance the savings offset vs capital against the limits for bank deposits if they go base up (£50k each license per person, so £100k for a joint account) and that above £16k our wonderful government won't give you any means tested benefit....

As always though, it is a balance across all your requirements which must be struck; pension, savings for short-term needs (holiday), known items to replace (car), emergency funds (boiler, redundancy), investing and "living" life too plus mortgage reduction that you should be looking at.

ailuro2

if your mortgage interest rate is a tracker, and is current;y around 1% then she may be right - you'd be better off finding a higer interest rate account to stash the money in - it wirks the same whichever way you do it - go to the highest interest rate with your money (after tax of course)

I doubt that's what she meant, but giving her the benefit of the doubt here.

Just take alook at my sig to see what overpaying can do for a couple earning average wages and paying off a mortgage by paying a bit extra when they can afford to:beer:.

blueberrypie

ailuro2 wrote: »

if your mortgage interest rate is a tracker, and is current;y around 1% then she may be right - you'd be better off finding a higer interest rate account to stash the money in - it wirks the same whichever way you do it - go to the highest interest rate with your money (after tax of course)

Even if she meant that (and I'm with you on the doubt), it was a poor way to say it. "Put your money in something that earns you better savings interest, and then use it to overpay when your mortgage interest rate goes up" is quite different from "it's not worth overpaying on this kind of mortgage"...