Advice needed on mortgage overpayments

reedy1814

Hello Everyone,

I am on a fixed rate mortgage at the moment and have started making overpayments of around £150 / month. Question is should I use this to pay of the interest I owe on the mortgage or make the extra payment as a capital repayment? Its currently set to pay the intrest of.

I would be grateful of any advice.

Cheers

FlashBarry

Hi reedy,

I'm slightly confused by what you have been told. I believe the 2 options for overpayments are:

1) The Bank uses the money to reduce your monthly payment so the number of years left remains the same

-or-

2) The Bank uses the money to reduce the amount of the mortgage remaining, so the number of years left reduces.

I believe the default is option 1 but if you want to pay the Mortgage off early you need to instruct them to do option 2.

I'm sure someone more informed will be along shortly!

reedy1814

Hi FlashBarry,

I was told two options yes... One reduces the interest I owe on my mortgage and the other as a capital repayment to reduce my balance .... The info from my mortgage statment says...

Overpayments will reduce your mortage balance (on which you are charged interest) but will not change the monthly payment amount.

OR

I can choose to reduce the monthly payments by applying the monies as a capital repayment.

Am a little confused. Want to reduce the term of my mortgage by the best means.

edinburgher

If you want to reduce the term, ask them to reduce the term and apply the OPs as capital repayment.

I actually wrote exactly what I wanted to do with the monies when I wrote to my mortgage provider so that there was no room for confusion.