Overpayments one off or monthly ? 28 September 2020 at 10:47AM in Mortgage-free wannabe 9 replies 141 views

blue4ever76

I'm looking at overpaying on my mortgage, but cant work out if overpaying £200 a month or a £2400 one off payment a year every year is better ?.
Calculators dont help with this 😩 so any help would be much appreciated.🤞

[Deleted User]

The earlier you make your repayments, the more interest you will save.

So it depends on when you're making the one off payment.

soupy600

I'm guessing you mean pay off £200 each month or save it and pay £2400 at the end of the year? I'm interested to figure out how to work this out too.

But with the present climate i was thinking i would be better of paying monthly then if i need a break it should be no problem as i've overpaied?

soupy600

https://www.moneysavingexpert.com/mortgages/mortgages-vs-savings/

blue4ever76

soupy600 said:

I'm guessing you mean pay off £200 each month or save it and pay £2400 at the end of the year? I'm interested to figure out how to work this out too.

But with the present climate i was thinking i would be better of paying monthly then if i need a break it should be no problem as i've overpaied?

Yes I've done the calculator for one year monthly versus one off and one off wins by about £30 but I cant find anything that says this would continue if I made one off payments year on year rather than monthly ?

blue4ever76

Deleted_User said:

The earlier you make your repayments, the more interest you will save.

So it depends on when you're making the one off payment.

This is what I thought but one off payment over just one year would leave me £30 better off .
I cant find anything to say this would continue to happen year on year.
I too believed monthly payments would lower the interest quicker but it doesnt seem so ????

[Deleted User]

It does if you make them sufficiently in advance of the one off option.  

It's all based on the balance at any given point. Basically, if you have spare money and won't be charged an ERC (and can't make more interest on savings than you're paying on the mortgage), pay if off your mortgage as soon as you can.  

getmore4less

Overpayment is just borrowing less,
Smaller loan less interest. 

The difference between monthly and up front is roughly
Rate * lump amount/2
Eg for 2% rate on £2400
0.02 * 2400/2 = £24.
Upfront saves £48 monthly saves £24

Year 2 that £2,400 saves £48. Does not matter when you paid it. 

getmore4less

blue4ever76 said:

Deleted_User said:

The earlier you make your repayments, the more interest you will save.

So it depends on when you're making the one off payment.

This is what I thought but one off payment over just one year would leave me £30 better off .
I cant find anything to say this would continue to happen year on year.
I too believed monthly payments would lower the interest quicker but it doesnt seem so ????

That makes no sense if you think about it. 

If you had £2400 debt and paid it off you would pay no interests.

If you paid £200pm you would still have a debt at the end. 

Throwaway1

If you pay it upfront at the beginning of the mortgage year it would save you money as that's 12 months of interest you're not paying on that full amount of money. If you save it up and pay it at the end of the mortgage year then it will cost you more as you've paid 12 months of interest on the full amount.