How does mortgage overpayment work?

cashdesk

Hi,

I will be applying for a mortgage in the next few months and will be able to overpay each year. Does anyone know if this will automatically bring down the monthly payments, or would I have to request a new payment amount each time? Or, will it just reduce the length of the mortgage?

worried_jim

It will reduce the term (and interest paid) as you’ll still pay the same monthly amount.

worried_jim

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

cashdesk

Many thanks.

Mahsroh

Think it can vary depending on who your mortgage provider is.


With mine (Halifax) each time I make an overpayment it doesn't automatically reduce either the monthly payment or the term, but my next payment (whilst the same amount) will be for slightly more capital, and slightly less interest, and so on. Then each time there is a Bank of England rate change, they take the current balance and term and simply recalculate my monthly payment..... This meant that when we recently had a 0.25% interest rate rise, my standard monthly payment actually went down!!


I'm sure other people on this forum have said that their monthly payment automatically went down every time they overpaid though? So may vary from lender to lender.