Overpayment does it come off acutal amount or interest

solorize

Hi,

I have been thinking about paying an overpayment into my mortgage.
But would like some clarification as am unsure how this works.

If I say payed in £1000 as an overpayment into my mortgage account
would this £1000 come directly off the amount I owe on the mortage.

i.e.
£150,000 - £1000 = £149,000

Or would I have to pay off some of the interest as well, so I would infact
be paying less off the actual mortgage amount, due to having to have to
pay of some of the interest.

i.e.(note I have just show a hypothetical value of £200 for interest)
£150,000 - (£1000 - say £200 for interest) = £149,200

FYI.
My mortgage is a Repayment Mortgage.

If someone could confirm I would be greatful.

Regards

Mark

[Deleted User]

It comes off the capital, as you will have paid the interest for that month in your regular repayment.

solorize

Thank you for your relpy. That was what I was hoping

Cheers

Mark

amnblog

How it is handled depends on the lender. It won't automatically come off of the capital immediately.

Check with your lender.

Gary123456790

Hi,

Just to encourage you on this, even paying an extra £50 or £100 a month will really shorten your mortgage.

Lets say your monthly payment is £800, of that £400 could be going on interest and £400 off the balance.

If you put an extra £100 in a month all of it comes off the balance, not just half, so you're then paying £500 off the balance instead of £400.

I find this calculator good:
https://mortgages.hsbc.co.uk/overpayment-calculator

It shows that if you borrowed 150k over 20 years at 4%, and put in an extra £100 per month you would pay it back nearly 3 years quicker!

Before overpaying you should ensure you have some savings for emergencies such as boiler/car breakdown as you cant always get the overpayments out again.

Gary.

brettcta

that calculator is quality, thanks gary

solorize

Hi

Thanks for all the advice, I will have a look and see if I can spare any
money to over pay each month.

I do have savings for emergencies, so as long as I can afford to put in
a bit extra I should be ok.

I am now wondering if I should just keep the £1000k an put it in my emergency pot. And then just do a monthly over payment. Rather than
doing a single over payment of £1000, as well as a monthly overpayment. As I guess it wont really make that much of a dent into the mortgage?

My current mortgage deal (5 years) ends the 1st January 2015.
So would I be better to keep the £1000 to pay for the fee's when
I have to remortgage, or just pay the £1000 off the mortgage now?

Does anyone have any thoughts on the above?