Platform overpayment

BristolPole
BristolPole Posts: 9
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edited 18 February 2021 at 11:57AM in Mortgage-free wannabe
Hi everyone, looking for some help on understanding overpayments on our Platform mortgage which was taken out recently as first time buyers so we're new to this. I spoke to Platform this morning as I wanted to make sure that the overpayments reduce the term rather than the monthly payments but the response I got is that our only option falls somewhere in the middle, and I want to understand whether that actually helps us save on interest.

Essentially, when we overpay each month this doesn't reduce our monthly payment immediately. However, on each anniversary of completion Platform would take all of our overpayments for that year and apply a capital reduction which triggers a recalculation of the monthly payment for the following year, while leaving the mortgage term the same (35 years). I've not come across this before when reading up on overpayments so would appreciate some help in trying to work out whether this actually benefits us.

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  • FtbDreaming
    FtbDreaming Posts: 1,118
    First Anniversary First Post Name Dropper
    Forumite
    Yes all payments will save you interest from the day you make them. Good luck in your op journey x
    Mortgage started August 2020 £69,700
    Mortgage ends Aug 2050 MFW: Aug 2027 
    Current Balance: £60,700
    MFW2020 #156 £723.13
    MFW2021 #26 £1184.71
    MFW2022 #11 £197.87
    MFW2023 £785
    MFW 2024 £174.73

    Determined to make it! 
  • My understanding through speaking to someone in the Platform team (called Mortgage Operations) is:
    - a lump sum payment can take a few days to be applied to the mortgage account 
    - by default the overpayment will keep the term the same and thus reduce the mortgage monthly payment required 
    - however, you can keep the monthly payment above this newer, reduced monthly amount and ask to stick to your original monthly payment (i.e. the figure before the overpayment) by way of a fixed direct debit.
    - this is of course higher than the new, reduced payment required so the additional amount per month is also counted as an overpayment (and towards your annual limit)

    doing it this way (asking to keep the amount the same) seems to be the way to ensure the mortgage is paid faster than the original term. I think this is what Martin means when he says how to get the most impact from the overpayment.

    Hope this helps.
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