Over payments best option

jono256

Hi 
I currently have mortgage  plus additional borrowing one for £40000 and the additional for £30000 totalling £70000 both have an interest rate of 2.19% fixed for 7years. The term Has 12 years left. 

I am allowed to over pay 10% a year on each so £7000 (dropping each year to avoid penalties). I currently  over pay weekly £134.00. 

I am wanting to continue over paying but am I doing it the best way to pay the least amount of interest and pay it off quicker.
should I pay £7000 a year on its start date. And save up to pay the next years amount through out the year.

continue as I am paying £134 a week

Or should I swap to paying £19.00  A day

what I am trying to achieve is paying my mortgage of as quick as possible with the least amount of interest. 

pinknsparkly

The sooner you make any payment, the less interest you will pay. So, assuming your mortgage provider allows you to make as many individual payments as you wish then a weekly payment on 1st of the month will cost you fractionally less in interest than a weekly payment made on 6th of the month. A yearly payment would save you money if you can make the yearly payment now and then have saved up the next £7000 for when your mortgage year resets itself. If you would need to stop making overpayments in order to save up the lump sum overpayment then you would be better to continue with weekly overpayments.

I assume you are making weekly overpayments as you get paid weekly? If so, then set up your overpayments to  be paid on the day you get paid. I get paid monthly at the end of the month and have set up our mortgage payments to be paid on 1st of the month to minimise interest for the same reason as you.

dimbo61

So if you have a spare £7000 lying around under the bed or in a shoebox pay it off in the morning.
However most people get paid monthly or weekly and can therefore overpay when they get paid.
Next year you will owe less as you have paid the normal payments and the £7,000 overpayment so you can only overpay 10% of the outstanding balance.
How much interest are you  paying  on the rest of the mortgage ?

jono256

Hi thanks for your advice. I have £7000 in savings for a rainy day but interest rates at rock bottom hence the question. As The first reply says my plan was to pay the maximum of 10% at the start off the year and use what I over pay currently to save up for when next year comes around.  I was trying to get a  prospective of how much each option saves me In interest for each option yearly, monthly, weekly and daily.  My current interest rate on both my original mortgage and additional borrow is 2.19%

dimbo61

Second wave of Covid19 !
Keep the rainy day funds and overpay every month.
If self employed build up more savings.
Consider offset mortgage