mortgage overpayment - term reduction vs monthly payment

xyz123

hi

just want to clear my understanding on effect of overpayments on mortgage, if some knowledgable members can help. i am currently in year 3 of a 5 year fix with post office (bank of ireland)

PO dont allow reduction in mortgage term with overpayment. instead the monthly outgoings are reduced.

my understanding is that basically whether the term is reduced or monthly payments are reduced it doesnt make any difference as long as i switch the product (or maybe remortgage with same provider???) after 5 years as many should be doing anyway! this is because the 100% of overpayments go towards paying off capital. Then at end of 5 year period i can reassess financial situation and decrease the term (and increase monthly payments) if needed. or have i missed something?

would be interested if any brokers or experts here can advise.

ta

Waldorf_Statler

essentially you are correct; it matters not as long as you use the saving in the difference in the monthly payments as a capital reserve to utilise when you next remortgage rather than frittering it on fun things.

however you might want to check how regularly the interest is calculated on the loan. i.e. daily, monthly, annually. if either of the latter two then the timing of the over-payment would be pertinent.

kingstreet

xyz123 wrote: »

or maybe remortgage with same provider???) after 5 years

FWIW a customer retention product with the same lender isn't a remortgage. However, what you owe after overpayments is the same, regardless of their use to reduce term, or reduce monthly payments.