Mortgage overpayment question/strategy

jumperabv3

I started my mortgage of £250k in March 2020.
I can pay up to 10% overpayments without a fee. So far I paid £24k so got just £1k more to pay until March 2021.
In addition to this around £1,250 is being deducted every month through direct debit, so £1250 x 12 months is £15k, plus £25k overpaid it would be £40k so it would leave £210k + interest (1.73% fixed for 5 years) to be paid from March 2021 onward.

Should I stop once I pay £25k and wait until March 2021 before making further overpayments or is there any value in paying now say another £5k - £10k before March 2021? Anything overpaid over that 10% would be charged with a 5% fee.
From March 2021 until March 2022 the overpayment over 10% would be charged with 4% and then it would be reduced each year until the 5th year where it's only 1% fee and then after the fixation period ends I'd have to negotiate a new deal or get the rate changed automatically to something around 4%-5% if the UK rates remain the same.

So do you see any reason or any strategy to keep on making more overpayments before March 2021 or the best thing to do now is to wait until March 2021 before making another £21k overpayments during the period of March 2021 - March 2022?

MovingForwards

Is the £1250 you normal monthly mortgage payment? If so, that doesn't count towards the 10%

Also, there will only be part of the £1250 each month going towards repaying the mortgage loan as part of it is also paying the interest on the outstanding balance.

Put your details into the link below, then you will see the difference:
https://www.halifax.co.uk/mortgages/mortgage-calculator/overpayment-calculator.html

jumperabv3

MovingForwards said:

Is the £1250 you normal monthly mortgage payment? If so, that doesn't count towards the 10%

Yes, the £1250 is a monthly payment, and yes, it doesn't count towards the 10% but I've already paid in addition to that £24k (£1k left to hit the 10% for this year).

Thrugelmir

Why pay 5% to save 1.73% over the following 12 months?  Besides which the saving would only be on £9,500. 

jumperabv3

Thrugelmir said:

Why pay 5% to save 1.73% over the following 12 months?  Besides which the saving would only be on £9,500. 

Thanks, that's what I thought ... so basically it's best to overpay 10% and stop at the 10% ceiling then.

Petriix

Yes, stop overpaying once you hit the 10%. Continue to save (in whatever account pays the best interest) the potential overpayments and then pay off another chunk once you pass the anniversary.

Double check whether the allowed overpayment will be 10% of the original balance or just the remaining balance and exactly what date the allowance resets. Then pay of as much of that balance as you can as soon as you are allowed without penalty.

jumperabv3

Petriix said:

Yes, stop overpaying once you hit the 10%. Continue to save (in whatever account pays the best interest) the potential overpayments and then pay off another chunk once you pass the anniversary.

Double check whether the allowed overpayment will be 10% of the original balance or just the remaining balance and exactly what date the allowance resets. Then pay of as much of that balance as you can as soon as you are allowed without penalty.

Thanks, the wording on my mortgage offer is stipulated as follows:

You are free to make lump sum or regular overpayments up to 10% of this mortgage, in each 12 month period from the date of completion.

Does it mean I can pay each year £25k with 0 fees?

getmore4less

Check with the lender how they calculate the 10%, 

some may include part of the regular payment if it stays the same after an over payment.

Did you know you were going to exceed the 10% by a significant amount each year?

if you did then a 2y fix may have been a better choice than the 5y.

Also look at what else you can do with the money, like more pension as that can be significantly more beneficial than paying of a deflating debt at 1.73% especilay for a 40% tax payer.

Petriix

jumperabv3 said:

Petriix said:

Yes, stop overpaying once you hit the 10%. Continue to save (in whatever account pays the best interest) the potential overpayments and then pay off another chunk once you pass the anniversary.

Double check whether the allowed overpayment will be 10% of the original balance or just the remaining balance and exactly what date the allowance resets. Then pay of as much of that balance as you can as soon as you are allowed without penalty.

Thanks, the wording on my mortgage offer is stipulated as follows:

You are free to make lump sum or regular overpayments up to 10% of this mortgage, in each 12 month period from the date of completion.

Does it mean I can pay each year £25k with 0 fees?

Best to double check with the lender. Mine specifically states 10% of the original amount.