Over payments on mortgage...

B'stard

I've only got a short mortgage term, 7 years, I'm at month one. I have got a 5 year fixed rate and hope to overpay each month to bring the term down to finish when my fixed rate ends, 5 years.
But what happens if I keep over paying, will the monthly payments go down in the 5 year fix, I'm currently paying £575pm?

Thanks for any advice.

_Andy_

No the payments will stay the same, but the term will reduce.

getmore4less

depends.

Lenders give you the choice to do either term or payments

If you choose payment
Some will change it monthly as you overpay.
Some will change it yearly.

dimbo61

You need to contact them and ask if you overpay can you keep the monthly payment the same and therefore reduce the term.
Make sure you will not be hit with any ERC,s

B'stard

I have chose to use the over payments to reduce the term time from 7 to hopefully 5 years, which is the length of my fixed rate.
But as I said in my op, what happens if I carry on making over payments. I am currently paying £575pm, will the monthly payments decrease in the 5 year fixed rate as I carry on making over payments - the remaining time in the fixed rate become a monthly payment say of £200pm, instead of £575?

Edit -

Btw its a Nationwide mortgage.

dimbo61

I think ( please check with Nationwide ) that you are allowed to overpay by up to £500 a month.
Now as long as you dont clear the mortgage before the end of the term you wont be hit with ERC,s
so even if you only have £100 left at the end of year four pay the balance off over the last 12 months !
You could use "whatsthecost" to work out how much you need to increase your mortgage payment in order to be Mortgage Free in 5 years.

B'stard

You can overpay by £500pm with Nationwide.

What the cost says if I over pay by £200 each month I will clear 2 years from the mortgage term - 7years down to 5years.
I plan to pay over £200pm so the monthly payments will go down in the 5 year fixed term, so as long as I have at least £100 in the mortgage account by the end of 5 years I'll incurr no erc.

dimbo61

You need to check with the lender Nationwide! not just take my word for it!
As you have worked out you only NEED to pay £200 extra a month to reduce the term to 5 years.
But if you can afford to overpay by £500 a month now then the balance will drop even quicker and you will pay less interest overall and have a much smaller mortgage balance to clear in the last 12/18 months.
Its all about using your hard earned money to best advantage ,no point having £10K in savings at 2/3% while paying a 5/6% mortgage and you also need to build up savings in ISA,s towards retirement