Capital repayments vs overpayments?

kwangomango

I'm slightly confused by Coventry's distinction between the two as both allow you to decide whether you want to keep your monthly repayments the same. 

Am i missing something?
https://www.coventrybuildingsociety.co.uk/member/help/mortgages/paying-more.html

fergie_

My reading of it is that small payments reduce the term, but larger payments they will let you decide whether to reduce the term or the repayment.

Either way, they are saying you effectively have the choice with both.

kwangomango

fergie_ said:

My reading of it is that small payments reduce the term, but larger payments they will let you decide whether to reduce the term or the repayment.

Either way, they are saying you effectively have the choice with both.

Yeah that my was take too. I was just confused as to why they go to the effort of defining 'overpayment', 'capitial repayment' and their respective amounts, when you can effectively decide to treat them as the same overpayment vehicle regardless of the extra amount you pay.

PixelPound

fergie_ said:

My reading of it is that small payments reduce the term, but larger payments they will let you decide whether to reduce the term or the repayment.

Either way, they are saying you effectively have the choice with both.

No it's not that. Capital Repayment means that you either reduce the term or reduce monthly repayment - keeping the other the same. Overpayment keeps the same term and instalment amount.

The difference is if you are overpaying temporary, then you can delay the choice of how to use the overpayment until the account is reviewed, either annually or when changing product. 

kwangomango

nic_c said:

fergie_ said:

My reading of it is that small payments reduce the term, but larger payments they will let you decide whether to reduce the term or the repayment.

Either way, they are saying you effectively have the choice with both.

No it's not that. Capital Repayment means that you either reduce the term or reduce monthly repayment - keeping the other the same. Overpayment keeps the same term and instalment amount.

The difference is if you are overpaying temporary, then you can delay the choice of how to use the overpayment until the account is reviewed, either annually or when changing product. 

It says in the link i posted that you can treat an overpayment as a capital repayment:

Overpayments

Daily or annual interest?

If your mortgage is on our daily interest scheme we will credit your overpayment to your mortgage account immediately, which means you will be charged less interest overall. However, we will not treat this as a capital repayment unless you specifically ask us to and the terms and conditions of your mortgage allow it. This means that your payments will not automatically be recalculated.