Overpaying Barclay's mortgage - will it reduce the length of the term?

Da_Crojanz

49 Posts

We took out a Barclays mortgage a couple of years ago for £690 a month and were of the mind that overpaying it would be better than a savings account so recently started paying £1000 a month to it. Going by overpayment calculators we figured this could get a few years off our mortgage term.

We've since found out that with Barclays, overpayments don't simply overpay the capital but go into a separate "overpayment fund" within your account and won't necessarily reduce your term. We've both called and asked in-branch at the bank and nobody has given us a clear answer as to what the extra money is used for or whether or not overpaying will reduce our term. I've looked through this forum too and the answers have also gotten me more confused!

Can anyone answer? If we're overpaying but it doesn't reduce the term what does the money actually do?

Mrs_Binxtoria

We also have a mortgage with Barclays and like you never got a straight answer from anyone that we spoke to until we went to switch our deal.  Overpayments do overpay the capital and reduce the term rather than reducing the payment as along as the overpayment is not more than 3x the amount of your normal mortgage payment.  The funds sit in the overpayment pot for if you wish to take a payment holiday at which point the interest kicks in and the funds are only available for a year.

It is all very confusing as we were regularly overpaying and i didn't want to get stung by going over our allowance, apparently you can make as many overpayments as you like as long as it is less than the 3x amount of your normal mortgage payment.

With this in mind I have stopped overpaying the mortgage and have started saving the money instead as interest rates are now higher than our mortgage.  I am 1 year in into a 5 year fix so I intend to overpay in the last year to bring the mortgage down before switching to a more than likely higher interest rate.  That is the plan anyway but with the ways things are currently going who knows?

Hope that helps with your query.