Over paying on mortgage

AubreyMac

I brought my first property in april.

My mortgage agreement states that I can over pay by 10% without any penalties.

Since I've brought my flat I have been spending 100% of my salary every month buying home essentials and works. Everything is pretty much done now and any outstanding works can wait.

I want to take advantage of overpaying 10 % but how is this done? Do I pay 10% each month or yearly?

I know i should just call up my mortgage lender but I'm only thinking about this now.

Landofwood

It will state the exact limits on your agreement. It's normally 10% of the outstanding balance per annum. So if you owe 500k in year 1, you can overpay 50k without penalty.

KayTM

Why not just add the extra to your normal monthly payment and set up a DD for the increased amount? That way you'll probably not even miss the money.

randomnut

You just call up your lender, say you want to overpay, and they can increase your monthly direct debit up to the amount you want. Easy peasy.

libf

randomnut wrote: »

You just call up your lender, say you want to overpay, and they can increase your monthly direct debit up to the amount you want. Easy peasy.

Or you can setup a standing order that you control yourself.

carslet

libf wrote: »

Or you can setup a standing order that you control yourself.

This is the best advice/

This way you can change the amount when needed.

Dandytf

I make overpayments every month online...simple...I control amount overpaid each month (knowing that it's not a permanent arrangement i.e. if rates rise I can adjust accordingly)

Yorkie1

If your mortgage interest is calculated on a daily basis (most are), then the sooner you make an overpayment, the sooner the balance goes down and the sooner the interest portion of your repayments will drop.

Look at your mortgage documents to see whether the 10% limit is of the original loan or the balance at the start of each calendar year; lenders differ.

Check your lender's website or T&Cs to see whether they will reduce the formal term of the mortgage (i.e. you continue to pay the same every month, but will therefore pay it off sooner) or your monthly overpayments (i.e. you have less to pay every month but the mortgage will end at the originally planned date). You may well have a choice in how the payments are treated.

Personally I choose to have reduced monthly payments with the original term. This means that if my circumstances change for the worse in the future, I am not still committed to high monthly payments; the amount I have to pay is less.

I just adjust my overpayment amount every so often so that the overall amount I'm paying remains the same when the contractual amount has dropped (within the max limits of course).