More come off my overpayments than expected

Probably wrong forum of the 2 apologies if so.
I've been making overpayments to my 10 year fixed a few times over last couple of year's. Usually lump sums of £100-600 where I can. Anyhow last couple of months have been tight, so I set myself the goal of over paying a smaller amount... Usually enough to round down the total balance left to the nearest £50 or £100.
I've never really paid attention to the pence in the past, however as I'm paying smaller amounts I am doing so as I like to see the round number's i.e. £77,700.00 balance left.

The last 2 over payments I've made should have bought the balance down to the 00.00, however last month's over payment took the balance to £**,*99.96p (an extra 4p) I just thought I made a mistake looking at my spreadsheets. This month's I double checked numbers before I overpayed and sent across the money, and I find it's 12p over so £**,*99.88 (an extra 12p that I didn't pay has came off)

I can't complain as it's paying off more although a only few pence. Anyone know why this happens? I presuming it's to do with interest on a daily basis. ccan anyone verify this or let me know how this works?

Comments

  • Zola.
    Zola. Posts: 2,204
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    edited 15 September 2020 at 1:57PM
    Your mortgage balance accrues interest daily. Each overpayment you make will chip off a slightly more interest each month so its possible this has had an impact. I keep an eye on our daily interest rate, as its another motivating factor in paying down this massive debt. At the very start, our daily interest rate was almost £12. Now after 5 years (on a new deal) and with regular overpayments it £5.50 or so... each overpayment shaves a few pence more off each month... i
  • theoretica
    theoretica Posts: 12,221
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    Are you paying a day or so before the due day - that might be enough to put the interest out by a few pence.
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
  • Are you paying a day or so before the due day - that might be enough to put the interest out by a few pence.
    My payments (or the principal) comes out on the first, 2nd or 3rd depending on weekdays and bank hols of every month. 

    So last month (August 11th) I logged on to my mortgage company and looked at the outstanding balance. I needed to pay £47.78 of the top of my head to round the balance down to the nearest £100.00, so I paid that. A few days later the balance when checking on the website was £**,*99.96 so an extra 4pencw was paid off. Which I thought was a mistake on my behalf.

    Fast forward to this month I paid something similar a few days ago after checking my balance, and an extra 12 pence has come off the balance compared to my over payment.
  • Zola. said:
    Your mortgage balance accrues interest daily. Each overpayment you make will chip off a slightly more interest each month so its possible this has had an impact. I keep an eye on our daily interest rate, as its another motivating factor in paying down this massive debt. At the very start, our daily interest rate was almost £12. Now after 5 years (on a new deal) and with regular overpayments it £5.50 or so... each overpayment shaves a few pence more off each month... i
    Yeah I'm aware of the interest accruing daily. I don't know how to keep an eye on it daily tho, apart from my spreadsheets which are usually accurate within a few pence.

    £12 a day makes me wince,on the plus side I don't think any mortgage company will give me that kind of money.
    £5.50 is what mine worked out at for August, which I still think is sickening, I'll be happy when it gets below £4 a month as with no overpayments the monthly interest will go down per month and never go up.
    For example a 30 day month will be £166 and a 31 day month goes up to £172 a few months ago. When it goes below £4 a day a 30 day month interest will be £120, the following 31 day month interest will be £119.20 for example, constantly rolling down the balance heavily (snowballing in effect). I'm sure yours will has already fallen into this bracket where it snowballs quickly month on month. Appears to be just over halfway through a mortgage term if no overpayments have been made.
  • Zola.
    Zola. Posts: 2,204
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    edited 16 September 2020 at 10:05AM
    I just update my manually at the start of the month, once the payment has gone, I check the balance in the account.
    The formula in excel for daily interest rate is (this is taken directly from my google sheet, adjust for your numbers..)
    =SUM(1.99/365)/100*B2

    1.99 is my interest rate / 365 days / 100 * Outstanding Balance.  Then use the number in £ format.
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