Overpayment confusion

LankyMoneySaver

Hi all,

I've recently re-mortgaged to a cheaper one so want to start making overpayments to bring the total monthly amount I pay off up to at least what I used to pay on the old mortgage, and possibly more some moths if I can afford it.

This article has me confused though:
http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

It's also worth checking your lender won't either reduce your normal payments (meaning you're not overpaying) or reduce the term of your mortgage (effectively locking you in to the higher payments). If they'll do either of these, it might not be worth overpaying after all.

I understand that you want your normal payment to stay the same - otherwise you'd negate the benefit of overpaying.

But how can they not reduce the term of your mortgage when you overpay if you keep the normal payment the same? Isn't reducing the term (and so saving on interest) is what you're hoping to do by overpaying? You can't keep both the normal payment and term fixed can you? Surely one or the other has to change?

Thanks,

Jonbvn

See the link at the bottom of the paragraph you linked to.

http://blog.moneysavingexpert.com/2014/10/09/dont-shorten-your-mortgage-term-if-you-can-overpay/?_ga=1.164805308.227585524.1419269906

This left me slightly stumped because overpaying has exactly the same impact as shortening the mortgage term, but with the great advantage that you can stop doing it if you want or need to.

Mrs_Rachel_Trelfa

Some companies change your monthly payment (reducing it) as a default if you overpay at certain levels depending on the T&C. You want to save money but they want you to pay over the term agreed to make money. Normally you would contact them to ask for the term to be reduced instead again if this is in your T&C.

Alternatively if you pay £500 per month and overpay by say £50 and your next payment becomes £499, you would adjust your overpayment accordingly so will become £51.