Mortgage overpayments not reducing my monthly payments??

tadaska

My monthly repayments are £430 but I pay pay £830 every month yet my repayment amount has remained the same.

I thought maybe they recalculate at the end of the year but I'm not sure as I made 2 overpayments of £400 in the previous financial year but the repayment remained the same to the penny.

Their (Barclays) mortgage financial year is 1st Oct to 30st Sept. I overpaid £400 Aug 2018 and Sept 2018. £800 overpayment is not a huge overpayment but still, starting Oct 2018 my repayment remained the same to the penny. And I have been overpaying £400 each months since but I am not seeing any changes to my repayments.

How does this work? I was expecting my repayments to start shrinking.

charlie792

If you make overpayments it can be calculated one of two ways. Either it reduces the capital amount and thus the term of the overall mortgage (ie you continue to pay the normal amount each month but any overpayments therefore mean you actually pay it off sooner than the actual expected end date of the term) or you reduce your subsequent mortgage payments. You would need to ask your lender if you want it to be treated this way.

If you intend to make regular overpayments then personally I would always opt to reduce the term, otherwise you would always have to calculate the amount you want to overpay by because the normal contractural payments would be decreasing

comeandgo

If your monthly repayments get less then you will still be paying your mortgage for the agreed term but if they stay the same, your interest part of the repayment will be less but the capital part of the repayment will increase, meaning you will finish paying your mortgage years earlier.

tadaska

Initially this was a 24 year mortgage with 2 years fixed. After those 2 years I remortgaged with a new lender (Barclays) with a 22 years of which 10 years fixed. So at the moment I still have over 21 years to go.

My plan is to make the maximum of the 5% overpayments allowed and pay it off by the time the fixed 10 year term is over. Or at least most of it.

I'd have to really get into this with a pen and paper to understand how this works. Oh well, as long as this lets me achieve the goal of finishing the mortgage early I'm happy.

Thrugelmir

Unless you ask the lender to amend your monthly repayment. The current standard amount they take from you by direct debit will remain contstant. Until two possible events take place. Either you switch to a new product or the interest rate for the product you have changes. At this point in time the monthly repayment will be recalculated to clear the outstanding debt over the remaining term of the mortgage.

If you wish to control the amount you pay. Switch from direct debit to standing order.

Overpaying every month will simply clear your mortgage even quicker. As the amount of interest your are paying greatly reduces.

getmore4less

Barclays have an option to never reduce the payment.
(even at normal recalculate points like rate change and annual)

If you want the regular payments to go down ask them to change to annual adjustment or more regular.

jackomdj

Have a look at this overpayment calculator. You do want the payment to stay the same, otherwise you would have to overpay more to be in the position you want to be.

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