Can someone please explain monthly payments and how to speed up this paying off !

So... we  took a mortgage of 230k  - 14 years ago. Originally the monthly repayment was around £900 at a rate of around 5%, then it dropped after 5 years to 2.75%, which was great. so we started making ovepayments of £400 a month.   A few years ago, interest rates went down again, around 2.5%, now 2.1%.  We took the opportunity to try pay more monthly.  

I remember at the time the customer service person didnt sound keen for us to overpay, honestly, just saying our monthly minimum payment would be reduced but I had to insist we didn't want to pay less.  What I don't understand it the minimum payment has been set to around £700 - not sure how long this has been going on.  Still with the overpayment of £400 a month.   

My question is : Why has the minimum payment dropped, and also, why does the statement say we still have 10 years to pay when we've been overpaying?

Balance is around 78K, under of a 'sub-account01' which includes a nagging remaining £500 that gets paid off separately and we don't know why it even exists...


  • Thrugelmir
    Thrugelmir Forumite Posts: 89,546
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 8 January 2022 at 9:45PM
    Everytime there's a change of interest rate applied. Your monthly payment will recalculated to clear the remaining balance by the contractual end date of the mortgage. 

    Your mortgage statement will state the contractual end date of the mortgage. This can only be varied by mutual consent of both parties. Don't concern yourself with it though. If you are overpaying every month you'll settle the mortgage debt well before that date. 

    Leaving the mortgage end date as it is provides flexibility. If your financial position changes for the worst. Then the minimum is all you'll need to pay. Better than shortening the term and being committed to a higher monthly outgoing. 

    PS. One day interest rates might rise significantly. 
  • happymum37
    happymum37 Forumite Posts: 299
    Fourth Anniversary 100 Posts Name Dropper
    I over pay every month but ask for it to come off the term so my monthly payments stay the same.  It reduces how many years I have left on it therefore. 

    Some people pay it off their capital so the monthly payments go down but the length of mortgage stays the same. 

    Just you tell them what to do when you ring up.  Term or capital.  

    If you are fixed rate mortgage you can normally over pay by 10% . If you are variable it tends to be unlimited. 

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  • powerspowers
    powerspowers Forumite Posts: 1,069
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    Yes sounds like your required monthly payment has dropped due to the overpayments. You can either keep the payments lower so more of your money goes as an overpayment and end up paying it back earlier. This gives you flexibility if you want to pay the lower amount. Or you can officially ask to reduce the term and keep the higher payment. 
    I expect your Overpayments are capped at 10% per year so you may find you are hitting that in the next few years and have to reassess
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