Overpayment query

badaz52

Hi all,

I currently have a Halifax mortgage that I am making regular overpayments on and I just want to check that I am timing my overpayments correctly.

My mortgage direct debit comes out of my account on the 20th of every month. According to the halifax website and based on my mortgage statements interest is calculated daily and applied to the account at the end of every month.

I am making my overpayments around the same time that my direct debit comes out.

Is the timing right on my overpayment to reduce the interest as much as possible or should I alter it?

[Deleted User]

Interest is calculated daily, so the sooner a payment is made, the lower the balance, and the less interest is charged,

But it's all subject to overpayment limits etc.

badaz52

Deleted_User wrote: »

Interest is calculated daily, so the sooner a payment is made, the lower the balance, and the less interest is charged,

But it's all subject to overpayment limits etc.

Mine is no more than 10% of the balance per year for overpayments.

So my overpayment timing is OK then I don't need to change anything?

TrickyDicky101

Assuming your overpayments come out of your monthly earnings then - and as zx81 stated as long as you are not breaching any ERC terms - you should aim to make the overpayment as soon after receipt of your earnings into your bank account as possible. This minimises the time that the cash will be sat in your account earning very little and puts it to work reducing your mortgage interest charges.

badaz52

TrickyDicky101 wrote: »

Assuming your overpayments come out of your monthly earnings then - and as zx81 stated as long as you are not breaching any ERC terms - you should aim to make the overpayment as soon after receipt of your earnings into your bank account as possible. This minimises the time that the cash will be sat in your account earning very little and puts it to work reducing your mortgage interest charges.

Thanks for the advice.

wantonnoodle

Not sure how the Halifax work, but with our lender (the West Brom), we can overpay up to £1000 per calendar month without penalty. This resets on the 1st of each month and you cannot roll this allowance over. We've set our overpayments up therefore to go out on the 1st of the month (we get paid on the 22nd and 25th of the month, and our regular mortgage payment goes out on the 28th), so that we get it in as early as we can each month to pay down the capital and hopefully reduce interest in the long term. Our monthly payments stay the same.