Overpayments on a repayment fixed rate

mattdragon2

I was told by my bank I can make overpayments of up to 10% of mortgage a year.

They said it does not reduce my total mortgage amount, therefore not reducing the term but instead it reduces the next monthly payments I make instead.

Seems a bit pointless or am I missing something? It's not really an overpayment to help reduce my mortgage owed.

CLAPTON

mattdragon2 wrote: »

I was told by my bank I can make overpayments of up to 10% of mortgage a year.

They said it does not reduce my total mortgage amount, therefore not reducing the term but instead it reduces the next monthly payments I make instead.

Seems a bit pointless or am I missing something? It's not really an overpayment to help reduce my mortgage owed.

speak to some-one else and say you wish to maintain the 'normal' monthly payment

Thrugelmir

mattdragon2 wrote: »

Seems a bit pointless or am I missing something? It's not really an overpayment to help reduce my mortgage owed.

You get the benefit of paying less interest over the entire term of the mortgage. While your monthly payments reduce. At the beginning on the next 12 month period you can overpay again.

amnblog

Was this individual at the bank wearing a big red nose, extra long shoes, and a flower that squirts water?

SG27

mattdragon2 wrote: »

I was told by my bank I can make overpayments of up to 10% of mortgage a year.

They said it does not reduce my total mortgage amount, therefore not reducing the term but instead it reduces the next monthly payments I make instead.

Seems a bit pointless or am I missing something? It's not really an overpayment to help reduce my mortgage owed.

It's a strange way of doing it isn't it. What bank is it? With my bank YBS any fixed monthly ops reduce the term, yet any odd one off payments reduce future payments. It's basically the same thing though.

shireknight

mattdragon2 wrote: »

I was told by my bank I can make overpayments of up to 10% of mortgage a year.

They said it does not reduce my total mortgage amount, therefore not reducing the term but instead it reduces the next monthly payments I make instead.

Seems a bit pointless or am I missing something? It's not really an overpayment to help reduce my mortgage owed.

Ok I'm pretty certain that is not possible.

Using myself as an example, I'm in a 20 year mortgage (fixed for the first 10 years) I've been making overpayments ever since I took it out and I'm on target to pay the mortgage off in year 8.

Admittedly on my annual statement every year the monthly payment amount drops and the mortgage end date remains fixed at 2027 however if I keep paying the same amount I'm paying now then in 2015 my balance will be zero so although officially my mortgage still runs for another 12 years I'll owe no money so I think common sense dictates that they will cancel it.

Well I hope so anyway, I'll be pretty miffed if in 2015 the bank turn around and refuse to remove their interest in my property on the grounds that I still have 12 years left to run on my zero balance mortgage lol