Santander Overpayments used to reduce term or reduce monthly payments?

isadreamalie

Hi

Currently I chuck 1500 extra at my mortgage a month and opt to reduce my payments. I'm now paying 616 a month and it's been falling steadily.  I'm coming on five years into my mortgage with the fixed deal ending in November. 

I know interest rate savings are higher if you reduce the term but I like reducing monthly payments at least whilst they are over 500 as I then have a higher disposable income each month.  I guess I can still reduce the term when I remortgage anyway. I have about 129k debt outstanding.  I started with 230k. Anyone else preferring to reduce monthly payments this way ? Is this wise? I hope to pay my mortgage off in five years so I will need to look at reducing the term soon

Nurse2047

Hi I have a Santander mortgage also but my OPs reduce the term and not the payments. A If you choose to reduce the mortgage term you will pay for your home sooner than if you go for reduced monthly payments. This means you will pay less interest overall and be mortgage free in fewer years. 

Sistergold

Hello I have been overpaying and also opting to reduce monthly payment and keeping term the same. Like you I am aware that reducing term will lead to more saved on interest. Reducing payment gives me more options to either increase my overpayment or do other things. I will continue to keep the term the same as I believe at some point I can just either pay it off completely or start reducing the term. My overpayment allowance is £999.99 as £1000 upwards attracts early repayment charge. My initial monthly  payment was over £2200 and now I am at £1955, mortgage balance is now at £409k. Also hope to reduce payment to under £500 before I will consider reducing the term. If I should have financial issues it’s nice to have a lower monthly payment. Interests rates are also not yet out of this world so not too much harm done for now. 🤷‍♀️ 

You say it’s fixed term, what is your overpayment allowance? 

Thrugelmir

isadreamalie said:

Hi

Currently I chuck 1500 extra at my mortgage a month and opt to reduce my payments. I'm now paying 616 a month and it's been falling steadily.  I'm coming on five years into my mortgage with the fixed deal ending in November. 

I know interest rate savings are higher if you reduce the term but I like reducing monthly payments at least whilst they are over 500 as I then have a higher disposable income each month.  I guess I can still reduce the term when I remortgage anyway. I have about 129k debt outstanding.  I started with 230k. Anyone else preferring to reduce monthly payments this way ? Is this wise? I hope to pay my mortgage off in five years so I will need to look at reducing the term soon

Hopefully you are not exceeding the annual overpayment limits and incurring early repayment charges. 

isadreamalie

Sistergold said:

Hello I have been overpaying and also opting to reduce monthly payment and keeping term the same. Like you I am aware that reducing term will lead to more saved on interest. Reducing payment gives me more options to either increase my overpayment or do other things. I will continue to keep the term the same as I believe at some point I can just either pay it off completely or start reducing the term. My overpayment allowance is £999.99 as £1000 upwards attracts early repayment charge. My initial monthly  payment was over £2200 and now I am at £1955, mortgage balance is now at £409k. Also hope to reduce payment to under £500 before I will consider reducing the term. If I should have financial issues it’s nice to have a lower monthly payment. Interests rates are also not yet out of this world so not too much harm done for now. 🤷‍♀️ 

You say it’s fixed term, what is your overpayment allowance? 

I can overpay by 10% a year I think I have 8 k or so left as an overpayment allowance for this year 

isadreamalie

Thrugelmir said:

isadreamalie said:

Hi

Currently I chuck 1500 extra at my mortgage a month and opt to reduce my payments. I'm now paying 616 a month and it's been falling steadily.  I'm coming on five years into my mortgage with the fixed deal ending in November. 

I know interest rate savings are higher if you reduce the term but I like reducing monthly payments at least whilst they are over 500 as I then have a higher disposable income each month.  I guess I can still reduce the term when I remortgage anyway. I have about 129k debt outstanding.  I started with 230k. Anyone else preferring to reduce monthly payments this way ? Is this wise? I hope to pay my mortgage off in five years so I will need to look at reducing the term soon

Hopefully you are not exceeding the annual overpayment limits and incurring early repayment charges. 

No I don't exceed those . I actually reached my overpayment limit last year so one of my overpayment wasn't as high as 1500

I guess the less debt you have the less you can overpay a year before charges 

Sistergold

isadreamalie said:

Sistergold said:

Hello I have been overpaying and also opting to reduce monthly payment and keeping term the same. Like you I am aware that reducing term will lead to more saved on interest. Reducing payment gives me more options to either increase my overpayment or do other things. I will continue to keep the term the same as I believe at some point I can just either pay it off completely or start reducing the term. My overpayment allowance is £999.99 as £1000 upwards attracts early repayment charge. My initial monthly  payment was over £2200 and now I am at £1955, mortgage balance is now at £409k. Also hope to reduce payment to under £500 before I will consider reducing the term. If I should have financial issues it’s nice to have a lower monthly payment. Interests rates are also not yet out of this world so not too much harm done for now. 🤷‍♀️ 

You say it’s fixed term, what is your overpayment allowance? 

I can overpay by 10% a year I think I have 8 k or so left as an overpayment allowance for this year 

That’s good that you are keeping within the limits of no repayment charges. For me I think reducing your monthly commitments initially is more important than reducing term. This is even more important in my case as I am on my own. So personal circumstances like how much you earn, how secure is your job, how nervous you are about your current monthly outgoings if you should lose your job and are you single or not, etc should help to decide the best approach for you. Yo can also be saving on the side so that when you remortgage you put in a lump sum.