Mortgage overpayments missing?

dudleypipe

Hi all

I think I'm missing something, hopefully someone can clear this up for me. I'll try to explain as clearly as possible, please sing up if its not clear!

I have two parts to my mortgage:
Part 1: On great deal (bank SVR with 1.75% discount for life of mortgage)
Part 2: On a rubbish deal (bank SVR +1%).

Naturally, I'm trying to chip away at the second part as fast as possible. Maybe one day I'll clear it and chip away at the other part!

To do this I set up a standing order to overpay £150 per month off the second part of the mortgage, on top of the standard Direct Debit mortgate payment. My mortgage provider charges £50 a go to re-adjust the term on the mortgage, so I decided to let them change the monthly Direct Debit payment amount instead, which should lower itself as each overpayment is received. My plan was that however much the standard DD payment dropped (as an impact of the overpayment) I'd add onto my standing order amount which would eventually end up in me paying it off faster.

I forgot to readjust my standing order amount even once (good intentions and all that) and when I got my yearly mortgage statement, the term hadn't changed (as I expected) but neither had the monthly payment amount.

So my overpayments which seemed to be reducing the capital owed, didn't affect the amount which I was paying by Direct Debit. Haven't I lost some money in there somewhere?! Surely one of them (term or monthly payment amount) has to change, otherwise the overpayments are having no effect?

Any help would be greatly appreciated, I've tied myself in knots over this. Think I've been looking at it for too long...

[Deleted User]

Are your overpayments reflected in the oustanding capital?

I overpay on a Nationwide mortgage, and the DD stays the same (at our request) and so does the term. Presumably because the overpaymennt can be drawn down in terms of a payment holiday for example. But obviously once the capital becomes zero, the mortgage will be finished, regardless of a remaining terms of a few years.

So just a question of presentation.

Thrugelmir

Your lender will normally only recalculate your standard monthly payment either at your request or when interest rates change. The mortgage term is contractual so can only be changed with both parties approval.

Your lender will not be monitoring your account to see precisely how much you are paying. They are collecting the required monthly amount by direct debit.

By reducing the capital balance owed quicker, you will be charged less interest every month. Over time momentum will build if you maintain

So all that's happening at the moment is that the mortgage will be repaid earlier than the contracted term if you maintained the current overpayments.

Repaying a mortgage early is a marathon not a sprint. However well worth the effort.

dudleypipe

Thrugelmir wrote: »

By reducing the capital balance owed quicker, you will be charged less interest every month. Over time momentum will build if you maintain

Thanks. So I guess its 'swings and roundabouts' whether I pay the amount off as part of the calculated monthly payment, or as an overpayment?

ie as they haven't reduced the monthly payment, more of that monthly payment is allocated to reducing the capital than previously?

Sorry if I seem a bit dim, I've got myself well confused!

[Deleted User]

dudleypipe wrote: »

ie as they haven't reduced the monthly payment, more of that monthly payment is allocated to reducing the capital than previously?

Correct. .

dudleypipe

Thank you all very much. The statement doesn't break it down far enough to show that its been knocked directly off the capital, however the person on the initial phonecall to the mortgage company did.

Surely they wouldn't dare lie?!

[Deleted User]

dudleypipe wrote: »

Surely they wouldn't dare lie?!

No. Make a mistake, potentially, yes. But not lie.

You should be able to do the calculation yourself though by look at starting capital, payments made (factoring in that some of it is interest), and closing capital. Though, this is without knowing what your statement looks like.

But you should be able to get a feel for whether it's right. Unless the statement just says "Capital owing = still a very big number". Which is pretty much what it feels like for the first 15-20 years.