Mortgage overpayments

WLITC

I just called Leeds (my mortgage lenders) to discuss overpayments and I agreed I’d like to over pay it by £150 a month for now. Can afford more but at least wanted to get the ball rolling while I think about the longer term approach. Anyway I assumed it would be a separate payment but she said she’s just increased my normal payment to the new amount, starting 1st Sept and I can cancel it back down at any point with at least 3 days notice before DD (direct debit) is due.  Is this how most lenders do it? Would there be any advantage to setting it up as a separate payment? 

Assuming I stick with just an increased monthly DD, is this extra coming off the capital amount or is it not possible to reduce just the capital? If not is there a way to reduce the capital amount if it’s a larger one off payment (still within the 10% max). I’d seen on a US vlog about paying the extra mid month as interest is calculated daily? Is there any logic to that? Surely if you paid your mortgage normally on the 1st of the month and the extra on the 15th, you’ve paid an extra bit of interest for those 15 days?  

Lastly I have about 10k in savings now that I could pay down the mortgage but that’s all the savings I have so a bit scared to use it all for the overpayments now in case anything happens with my job et, but is there a way to figure out how much I’d save in interest if I do it now as opposed to drip feeding payments over the year? I forget the exact amount she said by I can overpay but it’s around £11k up to end of April next year. I will most likely do that by then even if it means a lump sum before the deadline. 

bradders1983

You can make extra payments yourself. To be honest I have never paid my mortgage by direct debit as I am organised enough to do it myself every month, and therefore can set any overpayment myself month by month. To be honest I would have left the DD alone and paid any extra yourself, some months you may want to whack an extra £50 or whatever in.

Socajam

Ideally, I would not be making any mortgage overpayments until the economy is a lot clearer - or should I say the world is clearer.
We are still in a situation where job are being lost daily, the virus is returning in some cases and the stock market is artificially being propped up.
If you want to see what the real stock market looks like remove:  Amazon, Apple, Google and Face Book - than we will see the reality of what is happening.
I would save the 150 and if things do improve this time next year, I would then use the lump sum to overpay the mortgage - but right now I think it does not make sense with so much uncertainty surrounding us.

mortgagetakingages

Your mortgage doesn't change regardless of the economy, I personally will be paying off as much as I can as quickly as I can as the sooner I am mortgage free the sooner I am not vulnerable to all those things that Socajam has pointed out.

MovingForwards

I do a manual faster payment to my lender on payday, plus add money to savings and an extra payment to an old pension.

Nothing wrong with making O/Ps to help clear the mortgage, just add some extra each month to savings.

Socajam

mortgagetakingages said:

Your mortgage doesn't change regardless of the economy, I personally will be paying off as much as I can as quickly as I can as the sooner I am mortgage free the sooner I am not vulnerable to all those things that Socajam has pointed out.

Well you are one of the lucky people.
No one knows where the economy will be next month, end of the year or this time next year.

anna42hmr

my TSB mortgage OP's are taken automatically as well as part of the main direct debit, i personally find it easier as it means i am less likely to spend the money on something frivolous and decide to not OP that month.  

I have had my direct debit set higher than it should be since day 1 of the mortgage, and for me the sooner it is paid down the better.  As someone whom is paying a mortgage alone, their will be added peace of mind for me the sooner that my home is 100% mine and not the banks.  

Not to mention less interest in the pocket of the bank!

whilst i get what Socajam is meaning, ie. potential of job security etc perhaps meaning may need extra money down the line, and therefore may be an idea to keep the money aside for a while, at the same time has to be balanced with the fact that is reducing the debt further, and interest saved on the mortgage will often be more than it would gain being held the savings.   

as for timings of the payments, interest would typically be accrued daily and applied monthly but i would get in the regular habit of overpaying overall rather than worrying too much on what day in the month to OP.

PS you may want to take a look at the Mortgage Free Wannabee board on here, as you may also find some additional information (and perhaps even join one of the challenges, can be great motivation and support, and can see how others do it to.  

getmore4less

WLITC said:
...

 I’d seen on a US vlog about paying the extra mid month as interest is calculated daily? Is there any logic to that? Surely if you paid your mortgage normally on the 1st of the month and the extra on the 15th, you’ve paid an extra bit of interest for those 15 days?  

...

you have to be careful with these things they don't always give the context.
A lot of Americans get paid every two weeks that's where the mid month comes from.

When interest is calculated on the daily balance the best time to pay is as soon as you have the spare money which for most people will be their pay cycle(weekly, monthly...)

don't get too hung up on the actual date as the savings are tiny trying to optimise it.

the real savings come from the regular overpayments the timing has the effect of just one payment.over the full term
eg £100k mortgage 25years 
interest would be around £27k   
overpay by £150pm interest drops to  £18k  (also paid off in 17years)
the beginning or end of month saves around £60-£75 over the 25 years

Dandytf

I have used manual online additional payments.
Though in recent years, I find increasing Standing Order works as it can be raised and lowered anytime,