Pay year's mortgage upfront+ overpayment

SHONA

Hi,

We are with Norwich and Peterborough for our 5 yr 2.98% fixed mortgage.

We have decided to use our savings to make an allowed overpayment for this year. I was informed on the phone that this overpayment would reduce the capital and would not be eaten up by interest:T

I could potentially make upfront payment for this year's mortgage as well and save to contribute towards next year's overpayment.This would not incur any penalty.

However I have been give two contradictory pieces of information about interest we will pay if I paid upfront.

First: You can pay this year's mortgage upfront and this would reduce the amount of interest you pay as interest is calculated daily.

Second: Paying this year's mortgage upfront would not make any difference to the interest. Person on the phone tried to explain some calculations which did not make any sense as she agreed it will reduce my balance but ultimately I would be paying same amount of interest over the year ?? :sad: So better to overpay allowed amount and choose not to reduce monthly outgoing.

Although calculations from second person did not make any sense but her inference did. Any lender would try to squeeze maximum interest out of us.

I am keen to hear your views and expert opinions. Any ideas?

Thanks

Thrugelmir

Is your mortgage daily interest or not seems to be the question.

getmore4less

Do any lenders allow upfront payment of the monthly contractual payment?

maninthestreet

I suspect any cash lump sum you pay into your mortgage would be used to reduce the mortgage capital outstanding, and you would still be required to make a monthly payment.

kingstreet

There are lenders who will allow you to make overpayments then use them for future payment holidays.

This would seem a similar kind of arrangement.