advice please

jong1

hi everybody this is my first post much appreciated if you could explain how mortgage overpayments work If i save £100 a month in the overpayment account when it gets to say a £1000 would it be worth paying this off my mortgage and then repeating this every so often. I do not intend to use the overpayment account to draw back any funds what is the best option with this flexi mortgage :rotfl:

John_LG

Well, Jong1, I don't know about your mortgage account, but we have a flexible account, that we can overpay anything from £500 upwards. Therefore, as soon as we have £500 or more, we pay it in. We do it, because the interest rate on our savings account is less than our mortgage interest rate.
Your monthly mortgage payment has an interest component and another component that is actually paying off your debt (and reducing it, gradually, normally over 25 years). Obviously the more overpayments you make, the quicker you are paying off your actual debt, and therefore end up saving tonnes of interest, and paying it off quicker than the 25 years.

Look at the sticky thread on overpayment calculators...
http://forums.moneysavingexpert.com/showthread.html?t=155707&page=2&pp=10

If you are regularly making overpayments, perhaps consider at your next mortgage review, more accurately working out how much you can actually afford each month, and tell your lender how much you want to pay (and they'll tell you how long that will take! This is better than relying on overpayments, as mortgage rates tend to be worse for flexible mortgages.
After our first 2years, we upped our monthly payments to a more realistic amount, and knocked the term down to 18 years.
Wer'e now down to 3 years - and I can't wait to have it paid off (which is why we are now with a flexible account).
Good luck.