Barclays overpayment confusion

lukekelly19

Hello,

I am struggling to understand the terms of my Barclays mortgage. I am just about to switch rates as my current rate comes to an end on 31 May. But because I'm just switching (for several reasons), the term is not changing. I have a longer-than-necessary term, but am trying to counter that by overpaying, but not sure of the best way to do this. On the mortgage terms, I have two options:

-They say I can take it off the capital, but if I do this the monthly payment will reduce, as the term stays the same. So presumably this does not benefit me? 

-Or I can keep the overpayment in an 'overpayment balance'. (This can be used if at any time I fall behind - I am 99% sure I won't need this as my payments are very manageable.) What I am confused about is that the contract says "Any funds held in your overpayment balance means you pay less interest as they help reduce the total amount you borrow from us, but they’re not taken into account when calculating your monthly payments." so my monthly payments are calculated based on the pre-overpayment balance, at the moment about 7k higher. BUT, they say that keeping the money in an 'overpayment balance' is 'in effect' a way to reduce the term, because I'll be paying more each month. However, I don't see how this works- surely the extra I'm paying each month is just the extra interest because it's based on the pre-overpayment amount. And if the overpayment balance doesn't affect how they calculate the interest payments in what way can it reduce the total amount I borrow?

I suppose my question is, how can I most effectively overpay a 2-years fixed Barclays mortgage in this two year period? I can pay about an extra 7k now (I have done and can choose whether it's taken off the capital or put on the 'overpayment balance') and am likely to be able to overpay each month - probably up to 2x the current monthly payment. What's the best way for me to reduce the overall interest I pay in this 2-year period?

Many thanks for any advice.

dimbo61

The longer the term the more interest your paying.
So if you make a payment in say January  the mortgage payment in February  might be reduced by a small amount but your mortgage term will stay the same.
Using the Overpayment  option means  your mortgage payment remains the same every month BUT each month you pay a tiny bit more off the capital and a tiny bit less Interest.
You will clear the mortgage quicker and hence pay less Interest over the shorter term