Overpayment mortgage sub accounts

Guybrush_threepwood_2

I'm starting to overpay my mortgage. I can overpay by 10% annually which is fine. My question is should I specify which sub accounts the overpayment goes to, either the repayment or interest sub accounts or let the building society divide the overpayment between the two like they currently do with my standard payment?
The term will naturally reduce but is there any advantage to specifying sub accounts? Thank you.

lee111s

Overpayments should automatically come off the capital as part of you're contractual monthly payments will pay the interest due for that month.

getmore4less

Overpay the part with the higher rate.

If that will change over time it gets a tiny bit more complicated.

If the rates are the same then it makes no difference as long as you can keep your payments the same.

another consideration after the best on cost is,

If you want to have more flexability in the future with a lower contractual payment then overpay the repayment part first

ViolaLass

Guybrush_threepwood wrote: »

I'm starting to overpay my mortgage. I can overpay by 10% annually which is fine. My question is should I specify which sub accounts the overpayment goes to, either the repayment or interest sub accounts or let the building society divide the overpayment between the two like they currently do with my standard payment?
The term will naturally reduce but is there any advantage to specifying sub accounts? Thank you.

Do you mean that you have two mortgages, one interest-only and one repayment, with different rates? If so, overpaying the higher rate will save you more.

Or do you mean that you have one repayment mortgage? If so, you don't have sub accounts. The interest is calculated and added to the mortgage each month, as is your monthly payment. Your monthly payment reduces how much you owe overall - the bank does not 'choose' to divide the payment between interest and capital.

Guybrush_threepwood_2

I've got a repayment mortgage. On my online banking it shows the mortgage being made up of two sub accounts. They are both at the same rate so I presume one is the repayment part and one the interest part. Looking on the net I think just overpaying anyway will reduce my term in the long run and reduce the amount of interest I'll pay in total.

lee111s

Correct. Continue to overpay and it will be coming off the capital thus reducing the term as you've got less to pay off.


If you want to be double sure you can always ring the lender and they'll confirm what happens with overpayments.

ViolaLass

Don't assume that your bank will automatically reduce the term, they may reduce the monthly payments instead. You probably can reduce the term but you may need to tell them that that's what you want.

chanz4

this sounds like halifax, it wont let you decide I was told

Guybrush_threepwood_2

Thank you to everybody for your help and information. This site is probably the single most useful on the net.