Overpaying more regular payments better?

FreddieFrugal

Sorry, stupid thread title. I'm tired and coming down with something.

What I wondered was whether I'd be better to split my overpayment daily over the month, rather than pay monthly.

You see on the mse overpayment calculator paying 1800 every quarter saves less in interest than paying 600 a month. Therefore if you paid £20 a day rather than 600 a month, would you save even more?

Pretty sure our mortgage interest is calculated and applied daily, so surely the more regular the payments the better? Although going hourly would be a bit too much...and pointless!

betmunch

Assuming interest is applied daily which it is in most cases the sooner you make an overpayment the better.

However if you have 600 each month why stretch it out over 30days? Do you get paid daily?

If you are looking for the most cost effective way of doing it then its as much as possible as soon as possible

ourcornercottage

If your mortgage interest is charged daily and your mortgage allows without charge OP as soon as you have it. Check out your daily interest paid by looking at your mortgage statement any you will see the sooner you pay off capital the better.

getmore4less

FreddieFrugal wrote: »

You see on the mse overpayment calculator paying 1800 every quarter saves less in interest than paying 600 a month. Therefore if you paid £20 a day rather than 600 a month, would you save even more?

You have done the comparison wrong(or misunderstood the result) if that is your conclusion.

If you pay X of the mortgage at the beginning of a quarter you save more than paying 1/3 of it at the beginning of each month of the same quarter.

FreddieFrugal

getmore4less wrote: »

You have done the comparison wrong(or misunderstood the result) if that is your conclusion.

If you pay X of the mortgage at the beginning of a quarter you save more than paying 1/3 of it at the beginning of each month of the same quarter.

Monthly

Normally you repay £332 per month. If you regularly overpay £600, you'd be mortgage free 17 years and 0 month earlier. Your total payment over this period would be £77,759.

Quarterly

Normally you repay £332 per month. If you regularly overpay £1,800, you'd be mortgage free 17 years and 0 month earlier. Your total payment over this period would be £77,878.

Half yearly

Normally you repay £332 per month. If you regularly overpay £3,600, you'd be mortgage free 17 years and 0 month earlier. Your total payment over this period would be £78,056.

That's from the calculator.

getmore4less

That difference will be because some payments are made sooner than others, not because the payments more frequent.

my point still stands.

FreddieFrugal

getmore4less wrote: »

That difference will be because some payments are made sooner than others, not because the payments more frequent.

my point still stands.

Yes my own calculations today have indeed proven that it's better to pay one large overpayment a year as soon as possible than to split the payment over 12 months.

Assuming you've got the money to pay that out and still have an emergency fund, secure position.

I was only overpaying by £150 p/m this year, so I've made up the difference in one payment today

FreddieFrugal

Additional question:

My mortgage is with nationwide. You can overpay by up to 10% of the original loan amount a year.

Do you reckon that's per calendar year - resetting 1st Jan? Or will it be counting the year as the anniversary date of the mortgage?

Say I've overpaid max today, meaning I can't overpay again until 10th April 2016 (anniversary of mortgage) without early repayment charges?

FreddieFrugal

Ignore that! Found my own answer, it's by the anniversary.

That's good then, means we can save up til next April and be ready to overpay in full again on the anniversary date.