Should I overpay or wait?

Duckdoodles

Hello,

I need some advice please. 

I have a mortgage of about £207k. 1.63% fixed until May 2023. Mortgage is about £850 a month and I have been overpaying regularly about £400 for the past year. I can overpay a max of 10% per year.

I have just come into some money- £130k (interest free loan) and am trying to decide whether to pay it into the mortgage immediately or wait until the fixed term ends in May 2023. There is a penalty but I'm not sure how much.I'm guessing it will be less than the money I'll save on interest.  Mortgage is with Virgin. 

I also wondered what it means when they say make sure when overpaying that the term is being reduced not the monthly payments. To date each month after I overpay the £400 the direct debit amount reduces by a few pounds. I overpay with the extra so the total of mortgage and overpayment is always the same £1250. 

Hope you can advise. 

Thank you. 
Duckdoodles 

getmore4less

You need to know the ERC % profile and the dates it changes.


virgin have some ERC that are fixed some reduce overtime.


There will be an optimum time to overpay. 



Reduce term with overpayment is often code for keep the payments the same  many lenders have that as an option for overpayments




If you use the £130k loan can you meet any repayment terms on that

Duckdoodles

getmore4less said:

You need to know the ERC % profile and the dates it changes.


virgin have some ERC that are fixed some reduce overtime.


There will be an optimum time to overpay. 



Reduce term with overpayment is often code for keep the payments the same  many lenders have that as an option for overpayments




If you use the £130k loan can you meet any repayment terms on that

Thanks for getting back getmore4less. The maximum penalty for full repayment before May 2023 is £5500 or so. Penalty for overpaying beyond 10% is 2.5%. It doesn't reduce over time sadly. I pay £282 interest per month. Over the next 24 months (until May 2023) I would be paying £6700 or so in interest, so taking the 2.5% penalisation hit (£3000) seems worthwhile. 

130K loan repayment should be fine, too. 

What do you think?