Co-operative Bank Overpayments Question

jonmc1980

Hi, I'm looking for some advice from anyone making overpayments on a co-operative fixed mortgage. I have recently started making a regular overpayment on my mortgage. With the co-operative bank the overpayment goes into an overpayment fund rather than reducing the sum remaining each month. I then phone up and ask to use the fund to reduce the capital. Is it better for me to phone each month and do this or build up a few months then reduce the capital? Sorry if this sounds daft but I'm new to these things

TeddyBear_2

jonmc1980 wrote: »

Hi, I'm looking for some advice from anyone making overpayments on a co-operative fixed mortgage. I have recently started making a regular overpayment on my mortgage. With the co-operative bank the overpayment goes into an overpayment fund rather than reducing the sum remaining each month. I then phone up and ask to use the fund to reduce the capital. Is it better for me to phone each month and do this or build up a few months then reduce the capital? Sorry if this sounds daft but I'm new to these things

I would have thought it better to contact your lender for clarification because if overpayments on your mortgage are configured in this way, I would query at which point your overpayment is being offset against the capital.

From what you say, it sounds as though your telephone call is the 'catalyst' for arranging to reduce the capital. As much as I am annoyed with my lender (Nationwide) I have to say that, with the calculation of interest on a daily basis, any overpayments processed pretty much take effect immediately and any over £500 result in an adjustment of my monthly payments.

Presumably, as with anyone overpaying their mortgage, you are doing so to reduce your capital and, therefore, the interest you are paying on it? If you want your overpayments to reflect this, in your position, I would contact them monthly, so that the benefit of the overpayment can take effect as soon as possible.

cake21

Hi there,

I'm making overpayments on a Co-op mortgage. For me, the key advantages of the overpayment fund are:

1. you only pay interest on the net amount of your mortgage outstanding less the overpayment fund

2. you can get the money back if you need it again later

If you use your overpayment fund to pay off capital you could then reduce your minimum payment BUT you wouldn't be able to withdraw it again.

So in answer, I would say it depends on what you want - I don't transfer anything over to capital at all because I like having the overpayment fund as a rainy day fund (could also use it to take a payment holiday later on).

[Just to clarify Teddybear's point, the overpayment fund is reducing the interest paid from the day they receive your overpayment, so transferring it to capital doesn't help on that score.]

I find them really useful on the phone whenever I've wanted to check/confirm anything.

jonmc1980

Thanks for the advice!