Regular Overpayments vs Lump Sum Overpayments

NOVAMET21

Hi

I have got 2 year fixed mortgage. I'm planning to make some overpayments within these 2 years.

However, not sure whether regular overpayment is better than one lump sum payments.

For example, lets say I over pay £400 per month for 2 years which means over 2 years its £9,600 of over payment.

Or make 2 lump sum overpayments of £4,800 in the first year and make another £4,800 in the 2nd year giving total of £9,600 which is the same amount as making regular payment.

So the question is, is it better to make regular monthly overpayments or does it has little impacts on the interest I pay over these 2 years if I chose to make lump sum payments?

Thanks

Silence101

It depends on how your bank calculates interest. Ours is daily, so 2 lumps sums at the beginning of each year is best, but I don’t know how much we really save by doing that. We have to do monthly this year as we just don’t have the funds to do a lump sum.

kev2009

I personally make lump sum OP mainly because I tend to put the money aside each month and then when i have what i want to overpay, providing everything looks ok i.e job, not needed to use any of the money for anything else etc, then i OP. If i was to loose job or have some large expense, then i wouldn't Op and i'd use some/all the money as needed.

At present i OP but I keep the term the same which therefore lowers my monthly payment which at this point in time I prefer as I am coming up to renewing my 5 year fixed next year and IF interest rates go up, i want the longer term so as to hopefully avoid a big hike in monthly payments. Once I've fixed for another 5 years, then I plan for OP to reduce my term and keep monthly payment the same. As i'm single, this as been the option I've taken to try and mitigate any major changes due to any foreseeable interest rate hikes before i renew next year.

Then I plan to OP each year as much as I can to lower mortgage as much as possible, I won't be vast sums due to single income but will no doubt make a difference from what I've worked out on my spreadsheet, just hoping the numbers all tally up in reality

Kev

NOVAMET21

Thanks Kev

I think you are right, lump sum allows to be more flexible where if there are some high expenses you got to have some savings.

Silence 101 - I need to find out from lener when is their beginning of the year and if it makes any difference to when I make lump sum payments.