affect on overpayments when bank recalculates mortgage

anna42hmr

Hi all

just to check that i have the theory correct on this one.

I currently overpay my mortgage each month (as well as intermittent lump sums), the mortgage co do not recalculate payments so dd remains the same and the term is also left alone.

However, they will recalculate at certain points (such as end of fix, interest rate changes etc) as such they work out the remaining mortgage balance and adjust the payment to spread to the remaining term.

My fix ends november and i am thinking of doing a product transfer with the same bank at the end of the 2 years if deals are ok.

I would like to keep the flexibility of the longer term if needed so would rather not ask them to reduce the term in line with the overpayments already made by that point.

However i would still like to keep the affect of overpayments in terms of bringing down how long i will be paying for overall (therefore as long as all is well pay early, if not still have same term to fall back on.

Therefore am i right in thinking that as long as i adjust the overpayments in line with overpayments made before i will still end the mortgage earlier.

For example my agreed mortgage payment is £430, I actually pay £550 a month. Therefore if for example after the recalculate and say the monthly payments should be £350, if i up the dd to £550 (so overpay £200 a month vs £120 a month) will still have the same affect? (obviously i would take into account any interest rate changes etc to adjust accordingly).

Looking at this, will probably loose the early payment affect of lump sums at that point, but accept if that will be the case as if nothing else will have dropped the interest overall.

AnotherJoe

Therefore am i right in thinking that as long as i adjust the overpayments in line with overpayments made before i will still end the mortgage earlier.

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Of course. Otherwise you'd end up paying more than you owed!

Look at it simply, let's say you owe ten thousand pounds over ten years. Then you make overpayments of a thousand pounds a month. If the mortgage doesnt end earlier, eg when you've paid the final sum, you'd end up overpaying them more than a hundred thousand pounds !

It ends when you've paid it off.

getmore4less

It is the payment that determine the real term,

The contractual term is just there to set the payment.

One thing to watch is penalty charges on overpayments as the mortgage/payments gets smaller the overpayments get bigger and may trigger limits. you can always save them up and make adjustments at product change.