Overpayment Confusion

Hi I am a bit confused about shortening the term vs reducing monthly payment. As we are now overpaying by £500 a month the bank automatically reduces our monthly payments. I've asked if we can keep them the same but we can't unless I reduce the overpayment under £500. I could ask to reduce the term but I want the flexibility of keeping the term the same in case my circumstances change. So my question is am I getting any benefit by paying over the £500 if they are reducing the monthly payments? I don't want to change mortgage provider as we are on a good deal right now. Any advice appreciated!

Comments

  • Yes, you need to ask your bank to accept the overpayment, but keep the term "as is" and keep the normal monthly payment "as is".

    Nationwide ask you if you want it to be done this way or the other way which reduces monthly payment.
    £52,365 owing December 2017.Now for the final countdown..1st Jan 2021 - £29,316 -- 1st Feb 2021 - £28,809 -- 1st Mar 2021 - £27,309 -- 1st Apr 2021 - £26,811 -- 1st May 2021 - £26,315 -- 1st Jun 2021 - £25,811 -- 1st Jul 2021 - £24,311 -- 1st Aug 2021 - £23,809 -- 1st Sep 2021 - £22,305 -- 1st Oct 2021 - £21,798 -- 1st Nov 2021 - £20,292 -- 1st Dec 2021 - £19,783 -- 1st Jan 2022 - £18,276 -- 1st Feb 2022 - £17,762 -- 1st Mar 2022 -£17,248 -- 1st Apr 2022 -£15,713 -- 1st May 2022 - £15,202 --1st Jun 2022 - £13,703 -- 1st Jul 2022 - £13,184 -- 1st Aug 2022 - £11,665 -- 1st Sep 2022 - £11,144 -- 1st Oct 2022 - £9,822 -- 1st Nov 2022 - £9,298 -- 1st Dec 2022 - £7,572 --1st Jan 2023 - £7,045 -- 1st Feb 2023 - £5,516 -- 10th Feb 2023 - £5,518 Overpayment Pot @ 10th Feb 23 = £5,518 / Primed = £0 / Actual debt = £0!!!! "Yes, the medicine is harsh, but the patient requires it in order to live, should we withhold the medicine?" Hopefully at zero mortgage debt by December 2022 or very close to it. Determined for freedom! 🍻🥂🍸🍹.
  • Keep the monthly payment "as is" - this will lower the debt quicker but still leave the term remaining.
    £52,365 owing December 2017.Now for the final countdown..1st Jan 2021 - £29,316 -- 1st Feb 2021 - £28,809 -- 1st Mar 2021 - £27,309 -- 1st Apr 2021 - £26,811 -- 1st May 2021 - £26,315 -- 1st Jun 2021 - £25,811 -- 1st Jul 2021 - £24,311 -- 1st Aug 2021 - £23,809 -- 1st Sep 2021 - £22,305 -- 1st Oct 2021 - £21,798 -- 1st Nov 2021 - £20,292 -- 1st Dec 2021 - £19,783 -- 1st Jan 2022 - £18,276 -- 1st Feb 2022 - £17,762 -- 1st Mar 2022 -£17,248 -- 1st Apr 2022 -£15,713 -- 1st May 2022 - £15,202 --1st Jun 2022 - £13,703 -- 1st Jul 2022 - £13,184 -- 1st Aug 2022 - £11,665 -- 1st Sep 2022 - £11,144 -- 1st Oct 2022 - £9,822 -- 1st Nov 2022 - £9,298 -- 1st Dec 2022 - £7,572 --1st Jan 2023 - £7,045 -- 1st Feb 2023 - £5,516 -- 10th Feb 2023 - £5,518 Overpayment Pot @ 10th Feb 23 = £5,518 / Primed = £0 / Actual debt = £0!!!! "Yes, the medicine is harsh, but the patient requires it in order to live, should we withhold the medicine?" Hopefully at zero mortgage debt by December 2022 or very close to it. Determined for freedom! 🍻🥂🍸🍹.
  • carbonm said:
    I've asked if we can keep them the same but we can't unless I reduce the overpayment under £500. 
    Reduce your overpayment to £499.99
  • Thanks for the replies, I don't think I explained very well.

    I currently pay £1000 a month, so I am overpaying by more than £500, this means my minimum monthly payments are reduced automatically.  At the same time my capital payments are going up every month.

    The bank will not let me keep my minimum monthly payments the same but I don't want to reduce the term.

    Is it worth continuing to overpay by more than £500 or should I reduce them and save the extra cash until I have enough to pay off the mortgage?
  • powerspowers
    powerspowers Posts: 1,100
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    I think either your payment goes down or the term reduces - you can’t keep both the same as your overall debt is reduced? Not sure it makes a difference, as a reduced payment means you overpay more each month thus reducing the capital owed. 
    MFW 2021 #76 £5,145
    MFW 2022 #27 £5,300 
    MFW 2023 #27 £2,000
    MFW 2024 #27 £500/ £3,600


  • Reduce your overpayment to 499 and don't do it automatically.  Ring up and pay it off every month and tell them its off your term. that's what we have to do
    Part time worker.
     Plug that SAHM pension gap & Retire in style in 20 years. 
  • Sistergold
    Sistergold Posts: 2,004
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    edited 4 November 2021 at 10:07PM
    Even though the minimum payment is going down if you continue overpaying by £1000 your capital is reducing also the interest is reducing. I like overpaying and letting the monthly payment go down as it means if there should be some money problems I have minimal monthly obligations. So you don’t really need to stop the £1000 overpayment. When the minimum payment is too low for you at remortgage time you can shorten the term to increase to the minimum monthly payment to the level you want. 
    Initial mortgage bal £487.5k, current £266.8k, target £243,750(halfway!)
    Mortgage start date first week of July 2019,
    Mortgage term 23yrs(end of June 2042🙇🏽♀️), 
    Target is to pay it off in 10years(by 2030🥳). 
    MFW#10 (2022/23 mfw#34)(2021 mfw#47)(2020 mfw#136)
    £12K in 2021 #54 (in 2020 #148)
    MFiT-T6#27
    To save £100K in 48months start 01/07/2020 Achieved 30/05/2023 👯♀️
    Am a single mom of 4. 
    Do not wait to buy a property, Buy a property and wait. 🤓
  • South_coast
    South_coast Posts: 4,782
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    Could you make two payments a month of £499.99 each? My lender would recalculate the payment if I paid off £1k+ in a single payment, as they classed that as a partial redemption. So if I had more than that available to repay, I sent them £999.99 one week and the rest a week later
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • South_coast
    South_coast Posts: 4,782
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    Not sure it makes a difference, as a reduced payment means you overpay more each month thus reducing the capital owed. 
    The difficulty with this comes when you reach a lower balance - if you're capped at 10% per year for OP's then you want your monthly payment to be as high as possible, as you're going to burn through your OP allowance much faster if you continue to repay the same £ amount each month after your payment is reduced
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • Not sure it makes a difference, as a reduced payment means you overpay more each month thus reducing the capital owed. 
    The difficulty with this comes when you reach a lower balance - if you're capped at 10% per year for OP's then you want your monthly payment to be as high as possible, as you're going to burn through your OP allowance much faster if you continue to repay the same £ amount each month after your payment is reduced
    I'm not capped so I can overpay as much as I want a month. I think powerspower may be right as if I am overpaying more capital as the payments reduce would it make any difference to the interest I paid compared to if I reduced the term?
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