Overpayments and how they are calculated.

AnotherJoe

murphydog999 wrote: »

Lloyds used to be £500 before the change in D.D., I am advised (although the advisor wasn't aware of this) now it's £1000. So I could pay £999 without it changing - theoretically. What I can't do is pay £999 twice in one month, the payment change who still kick in.

My other option is, every month on the day the payment goes in phone the mortgage team and ask them to keep the D.D. the same. Slightly inconvenient and how long it would last for who knows.

..and your other option is to overpay each month by an extra (and different each month) amount equal to the amount the DD dropped by ...

... and your other other option is to do that perhaps once a year as its too much hassle to keep changing it.

My initial query refers to the answer that zx81 gave, however, the amount we borrowed was £150,000 (for example) not £150,000 plus the interest. So the 'whole pot' is different to the 'capital amount.' There are payments that go directly to the 'capital amount' and payments that come off the balance. Isn't there a difference??

Not really, each day they calculate what you owe in total, adding a few pounds interest until at the end (or start or whatever) of the month they make a deduction by DD equivalent to your calculated payment.

When you pay some money off, they deduct it from the total owed. If that is more than keep the mortgage length however many years its meant to be, they can either keep the DD the same and the mortgage will end earlier anyway because you will obviously get to a zero balance sooner, or they can lower the DD to keep the mortgage length the same.

chamelion

ViolaLass wrote: »

Nationwide say "if you make an overpayment of under £500, we won't automatically reduce your monthly payment amount, however, your overall mortgage balance will be reduced immediately... If you have a capital repayment mortgage and make an overpayment of £500 or more, we'll automatically re-calculate your monthly payment."

So under £500, it just comes off what you owe, over £500 and it reduces what you owe AND they recalculate the monthly amount. Yes you can over-ride that but the OP hasn't so I'm guessing that's what happened with her/him/ze.

Also, if they change the monthly amount (to your hypothetical £980) and you continue to pay £1000 then you are overpaying by another £20 each month, which doesn't matter UNLESS it puts you over the total overpayment amount allowed for that year and causes you to be charged fees.

this is really useful thanks!

So with NW they're saying there's no overpayment limit and no early payment fees, which is incredible.

Based on that and what you've written above, if i can afford to pay for e.g. £600 extra a month, and they reduce the monthly payment amount from £1000 to £990 based on this, I should continue to pay the same £1000 + £600 extra, which would quickly draw down the 25 year mortgage to 24, 23, 22 years - rather than pay them £990 + £600 which would then turn into £980 + £600 etc etc...