Repayment plus additional payments

PerfectOne

Just switched from IO to repayment . I was wondering alongside my monthly repayment (£643) if I wish to make addition £400 towards the mortgage would I notice any reduction in my monthly repayment straightway or later. My mortgage deal allows me to make 10% additional payment without any charge.

Thanks,

holly_hobby

Firstly check on what basis the 10% overpayment is allowed i.e per annum, bi-annually, quarterly, monthly etc .... I would doubt its per month .. so check it out before hand.

Secondly, when you make any overpayment, ensure that your lender immediately applies it to the os mge balance.

Daily rest should immediately take account of the reduction in borrowing, and adjust the amount of interest charged accordingly, this should happen each time you make an overpayment.

BUT this doesn't mean that your standard monthly payment will automatically be re-adjusted though - just means you will repay your loan quicker.

Put the questions you have posed here to your lender ... they are the very best people to give you the correct answers - as a NB - ask for them to confirm in writing the responses they provide in this matter - that way if there are any future probs or confusion, you have documentary evidence of what you were told in the first place (not to be negative - just to ensure you have a safeguard "just in case" ).

Hope this helps

Holly

CLAPTON

why do you want a reduction to your monthly payments
what's the point of overpaying if you don't want to end the mortgage earlier

holly_hobby

Because the lowest amount of borrowing over the shortest affordable time period (thereby minimising the overall cost of borrowing), is considered prudent financial planning and from a professional point of view "best advice".

My advice is, if its affordable and you aren't consistently using or dipping into your emergency cash to make the overpayments, then its a great idea.

Holly

PerfectOne

Thanks for the advice I will definatly contact the lender and put forward these questions. The 10% is allowed over a period of 12months.

holly_hobby

Right ... thought it may be annually ... reducing your borrowings as and when possible is an excellent way to manage your liabilities so full marks to you.

As to the nitty gritty - dont forget to ask your lender for confirmation in writing - and then everyone knows for sure where they are up to, and also prevents them from playing silly beggers later in the day...

Good luck

Holly