Overpayment made / choices not made clear

GreenOlive22

Our mortgage is currently in 2 parts. Two months ago, we made a 10% overpayment of £21k on the larger part of our mortgage. We were unaware that we had a choice of either reducing our monthly payments or reducing the remaining term. I know...we just didn't realise until we read up on it recently.

When we phoned our mortgage company to make the overpayment, at the end of the call they said "would you like us to recalculate your monthly payments" - they didn't mention the other choice of reducing the term. Can we challenge them on this? 

We now realise that reducing the remaining term instead of the monthly payments, would have been better. 

dimbo61

Well done you have made an overpayment of £21,000
Your saving Interest on that overpayment each month so saving even more over the rest of the mortgage term.
Now you new monthly mortgage payment will be less each month 
So you can overpay the mortgage  every month by that amount or check out savings accounts which might pay more.
Reducing the term means you HAVE to carry on making the full payment each month.
You have more flexibility  this way 

gih

Depending on your bank, you might be able to phone up and change the term easily enough anyway.
For example, with Nationwide you can apply to change term online and they'll change your term within ten working days, for no charge.  They might do affordability checks.

But as @dimbo61 says, keeping the term the same generally gives you more flexibility.

GreenOlive22

Thanks! I'm more interested in what's financially better and whether we can challenge the mortgage company by only suggesting one option over the phone. Can anyone help?

fewcloudy

GreenOlive22 said:

Thanks! I'm more interested in what's financially better and whether we can challenge the mortgage company by only suggesting one option over the phone. Can anyone help?

No challenging required, you can relax
.
Those options are both good options. And you are going to clear your mortgage quicker in both of these scenarios, i.e. the term is shortened by default, because although they may have recalculated (reduced) your contracted monthly payments, you will just arrange to pay what you've always paid each month, right? But now some of it is an overpayment.

And even better for you is that if you hit a bad patch over the next X number of years, where money is tight you would be able to just reduce your monthly payments to the lower level if required.  So all is good, you have done well, crack on!