Help with mortgage overpayment. My head hurts.

tony3619

Hello, 

So my mortgage amount is roughly £75000. I want to pay off £4000-£5000 as a one off payment. 

I wish to reduce the monthly payments instead of the mortgage term (which is 29 years) so that it stays within my budget. What's the saving in interest versus reducing the term if we used 6% interest as an example (which is probably what it will be when I get a new deal) is it actually worth doing for a saving of £25-30 a month?

Cheers

laura_louise

There is a third option, which is the one that I do, and that's to just make the overpayment and keep my monthly payments and term the same. It only gets recalculated when I change to a new fix. Has the effect of overpaying even more during the period of my fix since the monthly payments are the same.

If i wasn't doing this, I'd probably opt to decrease the monthly payments and keep the end date the same for the sake of flexibility.

There's a good article by Martin here which really helped me: https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

tony3619

laura_louise said:

There is a third option, which is the one that I do, and that's to just make the overpayment and keep my monthly payments and term the same. It only gets recalculated when I change to a new fix. Has the effect of overpaying even more during the period of my fix since the monthly payments are the same.

If i wasn't doing this, I'd probably opt to decrease the monthly payments and keep the end date the same for the sake of flexibility.

There's a good article by Martin here which really helped me: https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

Thanks for the advice. 

Ideally I am leaning towards reducing the monthly payments as I'm probably going to need lower outgoings on a monthly basis. 

I'm not sure how the savings in interest differ between the 2 methods? I know reducing the term would work out saving roughly £16000 over the remaining term but I'm not sure about if the payments are reduced. 

tony3619

Also how early can I line up a new fixed rate for when mine ends? I have 8 months left on my current deal and want to look at others from The same provider 

K_S

tony3619 said:

Also how early can I line up a new fixed rate for when mine ends? I have 8 months left on my current deal and want to look at others from The same provider 

@tony3610 For product-transfers (switching to a new product with the current lender), it depends on which lender it is. It can range from 3 months (eg: Halifax) to 6 months (eg: NatWest). I can't think of any that will allow a product transfer earlier than 6 months.

tony3619

K_S said:

tony3619 said:

Also how early can I line up a new fixed rate for when mine ends? I have 8 months left on my current deal and want to look at others from The same provider 

@tony3610 For product-transfers (switching to a new product with the current lender), it depends on which lender it is. It can range from 3 months (eg: Halifax) to 6 months (eg: NatWest). I can't think of any that will allow a product transfer earlier than 6 months.

Do lenders factor in likely rate rises before they are officially announced?