Mortgage overpayment or Reduce Term?

alw1971

Hello,

I walked into my bank yesterday to make a £500 overpayment on this months mortgage. I try to do this every month but today the chap behind the counter asked 'why do overpay and reduce your monthly amount instead of reducing the length (term) of your mortgage?'

This made me think about the difference between the two?

What is there to be gained/lost by reducing the monthly amount or the length remaining?

My mortgage is now around £50000 over 16 years and more often than not I overpay each month by £500. This reduces my monthly amount by around £3.50 - £4 therefore I might pay off my mortgage in around 6 years.

Regards,

Andy:)

SamDude

You keep the flexibility of not overpaying Vs being contractually obliged to make the higher monthly payments.

gazter

alw1971 wrote: »

Hello,

I walked into my bank yesterday to make a £500 overpayment on this months mortgage. I try to do this every month but today the chap behind the counter asked 'why do overpay and reduce your monthly amount instead of reducing the length (term) of your mortgage?'

This made me think about the difference between the two?

What is there to be gained/lost by reducing the monthly amount or the length remaining?

My mortgage is now around £50000 over 16 years and more often than not I overpay each month by £500. This reduces my monthly amount by around £3.50 - £4 therefore I might pay off my mortgage in around 6 years.

Regards,

Andy:)

i might be getting my head around it wrong, if the monthly payment is going down everytime you overpay, doesnt that mean the time reminaing to finish your mortgage isnt getting reduced at all? It is spread over the same amount of months, just you are paying less per month.