Overpaying mortgage

SG27

I want to make overpayments that reduce the term of the mortgage as opposed reducing future repayments. I phoned our mortage company YBS and they told me that to reduce the term we need to pay a fixed overpayment each month by changing our direct debit. But we wanted to pay differing amounts as and when we had it. According to YBS this method would only reduce the future payments.

After discussing with YBS they said that if we make a fixed overpayment then also pay in dribs and drabs that the odd bits we pay would effectively increase our future overpayments by keeping the payment amount fixed but reducing the original payment if you see what mean?

But what I can't work out is whether it would actually save much in interest by paying the irregular amounts this way or if it would be better to save the irregular amounts in an account then up our fixed monthly payments for a time to use up the savings. Our mortgage is a higher rate than any savings accounts pay currently.

Dave_the_Ginger_Cat

Please ask them to explain if it will reduce future repayments or prepay future payments. These are very different things

SG27

Dave_the_Ginger_Cat wrote: »

Please ask them to explain if it will reduce future repayments or prepay future payments. These are very different things

They said is would reduce future payments. For example current payments of £500 + £100 fixed monthly overpayment. If we make item irregular payments over the next year it reduces the following years payments to, for example £450. The payments are fixed at £600 but now £150 of this is an overpayment compared to £100 before.

dimbo61

We have a YBS mortgage and have overpaid every month for the last 7 years.
Our payment has remained the same as we asked for the payment to remain static.
Each year the mortgage payment is recalculated in march and Should go down ( but we have the static payment )
We set up a d/d to overpay and also pay extra when we can.
Every penny we overpay is saving us the interest rate we pay TAX free.

SG27

dimbo61 wrote: »

We have a YBS mortgage and have overpaid every month for the last 7 years.
Our payment has remained the same as we asked for the payment to remain static.
Each year the mortgage payment is recalculated in march and Should go down ( but we have the static payment )
We set up a d/d to overpay and also pay extra when we can.
Every penny we overpay is saving us the interest rate we pay TAX free.

Thanks. That's what we are going to do. We want to get it paid up as soon as we can! And the interest we are saving by overpaying is huge!!

System

SG27 wrote: »

I want to make overpayments that reduce the term of the mortgage as opposed reducing future repayments. I phoned our mortage company YBS and they told me that to reduce the term we need to pay a fixed overpayment each month by changing our direct debit. But we wanted to pay differing amounts as and when we had it. According to YBS this method would only reduce the future payments.

After discussing with YBS they said that if we make a fixed overpayment then also pay in dribs and drabs that the odd bits we pay would effectively increase our future overpayments by keeping the payment amount fixed but reducing the original payment if you see what mean?

But what I can't work out is whether it would actually save much in interest by paying the irregular amounts this way or if it would be better to save the irregular amounts in an account then up our fixed monthly payments for a time to use up the savings. Our mortgage is a higher rate than any savings accounts pay currently.

Are you on a fixed deal with YBS? If not have you considered one of their offsets? Then, just pay into the offset account instead. Interest saved, then you can get instant access to the money should you need it.

robatwork

I have a YBS mortgage.
Their terms state that any overpayments will go to reducing the mortagage TERM not future payments.

They also state to advise YBS in advance of any overpayment if the overpayment is to be used for reducing the term or reducing future payments. So it looks like you get the choice but the default option is the term.

Of course that is my mortgage and your terms may vary. I would send them a letter just saying that you want any overpayment to go towards reducing the mortgage term

dimbo61

Should have said it is a YBS OFFSET mortgage and we hope to save £75,000 in interest by offsetting and overpaying ;-)