Mortgage overpayment or savings 10yr fixed

Qyburn

george4064 said:

Qyburn said:

TiVo_Lad said:

Barclays modus operandi is explained here:

https://www.barclays.co.uk/mortgages/existing-customer-centre/overpayment-underpayment-explained/

Smaller over payments reduce the term, bigger over payments reduce the monthly payment.

It's odd that they operate this "separate account" approach, but the OPs over payments are reducing the term, which is what most people would expect (and want) i.e. an over payment pays off the mortgage faster at lower overall cost.

We were offered an Abbey National product that worked like that, effectively almost like a linked savings account.  Money in that separate account reduced the interest due each month, the effect being that each monthly payment paid off more principle and therefore shortened the term. Or you could merge the cash into the mortgage reducing the balance and the monthly payments.

What you've just described is an Offset Mortgage.

Offset mortgage was different and that was what we chose, via Lloyds TSB as it was then. The offset mortgage offset the balance from our current account (and optionally from any nominated Lloyds savings accounts that we linked in). So we gained the offset benefit as soon as salaries were paid, we didn't have to specifically pay into the mortgage.