Mortgage Overpayments daft question

newyearnewme_2

Sorry if this is a daft question, I am currently overaying by £40 a month (allowed to make overpayments of 10% per month) however what has confused me is people are talking about overpayments reducing the term or the payment??? If I do nothing does this mean the term is reduced? or do I specifically need to tell Northern Rock that I want the monthly payments to stay the same and therefore reduce the term?

thanks

dimbo61

Paying £40 a month overpayment will help in the long term but I dont think NR will recalculate your mortgage payments until you have overpaid by say £500.
just to set your mind at rest give them a call and ask for your payment to remain static ( unless interset rates go up!)

andrewmp

You might be actually able to pay 10% of the original loan amount per year, not 10% of your monthly payments. Obviously it differs with lenders though so it's something you would have to check.

Overpayments will only usually reduce the term if you keep up the same amount of overpayment (from the original amount). They'll often reduce your payments so you have to remember to up your overpayments if you want the mortgage to end earlier.

newyearnewme_2

thanks for the swift answers. I am currently on a fixed rate due to end in May 2011 by then I will have made over £500 of overpayments. Therefore if i do nothing will they calculate the new monthly payment over the term I should have left rather then the term that I have left (because of the overpayments) As I am thinking it may be better to reduce the monthly payment and then make overpayments so that if circumstances change I do not have to make the overpayment, but would I be right in thinking that this new monthly payment will be a reduced monthly payment because of the exsisting overpayments (if that makes sense)

MoneySavingMission

Check with your mort lender. Mine is only off term if £500 or more. Otherwise it just comes off the overall capital.