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Monthly overpayment or annual lump sums?

edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
4 replies 914 views
bubblybeebubblybee Forumite
126 Posts
edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
I tried searching but couldn't find the answer,

Is it better to pay a monthly over payment of £100 or an annual overpayment of £1200 or 3 year overpayment of £3600 at the end of my fixed term?

The key mortgage info is a 30 year mortgage starting at £150,000 at a rate of 5.99% fixed for 3 years.

If there is a thread which helps me look at all options, please can you point me in the right direction.

Many Thanks.
A big thank you to everyone who contibutes to the MSE forums :T

Replies

  • Queen-Bee_2Queen-Bee_2 Forumite
    828 Posts
    Mortgage-free Glee!
    ✭✭✭
    Hi BB,

    It'll partly depend on how your interest is calculated. If it's daily or monthly, then the benefits of paying off will hit your account sooner rather than later. If annually (though I am not sure how many products, if any, use this method these days) then it might make more sense to keep it in a high interest account (not many of these around either these days alas) until the end of the year. As your interest rate is quite high, it's most unlikely you'll get a better return on a savings account at present. You do need to check the particular details of your mortgage product!

    Not sure of any specific threads that answer your query, but I hope this helps. Best of luck!
    QB
  • As Queen-Bee said.
    Some lenders do not like the hassle of dealing with small overpayments so they allow a minimum lump sum overpayment such as £500 or £1000. Research your overpayment options with your lender.
    Pay the minimum lump sum as often as you can if lump sums are all you can overpay.

    I am fortunate in that I am allowed to overpay up to £500 a month. I can also pay as little as £1 as often as everyday. I used to overpay twice per month. First just after the first of the month and second a week before pay day. This was when I was uncertain with my budget and had little savings to correct mistakes.

    I now overpay the maximum the day after pay day. I also requested permission to move my mortgage repayment date to be this day also. Thus I do not lose interest on money left in a current account waiting for the lender to take it. If I was to be paid over the weekend the I would be paid the Friday before.

    Where possible make your overpayments on a Monday or Tuesday to avoid them getting stuck in the banking system over the weekend or bank holiday.
    J_B.
  • MarieAAPMarieAAP Forumite
    278 Posts
    Joe_Bloggs wrote: »
    Where possible make your overpayments on a Monday or Tuesday to avoid them getting stuck in the banking system over the weekend or bank holiday.J_B.

    Thats a good suggestion!
    M
  • Thank you for all your help. The mortgage lady was trying to put me off making monthly over payments for what she considered to be such small amounts but I think given the interest is calculated monthly it makes sense to do it that way given that savings rates are so poor.
    A big thank you to everyone who contibutes to the MSE forums :T
This discussion has been closed.
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