Over payments

Yates78

Quick question - I plan on making over payments over the next 5 years committing a minimum of £50 per month. Over a year that would be a minimum of £600 over payments, does the whole £600 come off of the capital?

[Deleted User]

yes it does, at a rate of £50 per month.

So the capital would reduce by £50 per month.

SG27

Yes it does. And saves you paying interest on that £600 over the remainder of the term.

Yates78

Thanks, does it make any difference if I pay the money off every month or, quarterly or pay off a lump sum annually?

dawyldthing

best to check if the interest is calculated monthly if so its better to be paid off monthly as it will reduce the interest you pay monthly. Try this to see how much of a difference it will make http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

[Deleted User]

As mentioned above paying it off every month would reduce the amount of interest you pay on the remaining balance at a quicker rate. (i.e. by £50 per month from now as opposed to £600 from month from month 12 if you were to pay in one lump sum)

Check with your mortgage lender to see if there are any restrictions on the way that you overpay. Some have minimum and maximum requirements eg some have a minimum £500/overpayment and/or max. 10% of the outstanding balance etc.

So to prevent any early repayment or admin charges call to check with them that what you want to do is permitted within the terms and conditions of your mortgage.

But, assuming what you want to do is permitted penalty free, then overpaying £50 per month is the most cost effective way of doing that.

getmore4less

Many mortgages interest is calculated daily(added monthly) these days so the sooner the payments are made the better(subject to any penalties).

[Deleted User]

getmore4less wrote: »

Many mortgages interest is calculated daily(added monthly) these days so the sooner the payments are made the better(subject to any penalties).

Out of curiosity, how do you find this information out?

Is it in the terms and conditions of the mortgage? or is it institution specific? Would you just need to call and ask the lender?
(would be interesting to know what the daily rate would be).

BW,

D9

getmore4less

Domino9 wrote: »

Out of curiosity, how do you find this information out?

Is it in the terms and conditions of the mortgage? or is it institution specific? Would you just need to call and ask the lender?
(would be interesting to know what the daily rate would be).

BW,

D9

Should be in the T&C exactly how the interest is calculated and compounds(added to the loan)

eg.
Some of Barclays mortgages(trackers and offset from the time I got my mortgage) are daily interest added end of month, regular payments only on the 16th.