Overpayments advice please

SRCheshire

Hello folks. 

I wanted some advice on making overpayments on our mortgage please.

We have spoken to our lender who advises the following:

• If we make an overpayment of £133 per month (from £767 to £900) we will overpay a total of £35,100 during the remainder of the fixed term period which ends 01/10/2027. 

• That will bring our outstanding balance down to £167,594.09.  By making no overpayments, the balance at the end of the fixed rate period would be £187,000.00.

What I am confused by is that the difference between the two balances at the end of the fixed rate period does not total the amount of overpayments made of £35,100.  The difference is around £20,000. 

Am I missing something? 

Is it to do with interested calculated monthly?

Many thanks for your help. 

maisie_cat

£133 a month between May/24 and Sept/27 is £5.5k so I suspect the £35100 is the total payment (£900x39 months)

la531983

Aye you have your sums wrong. It would take you nearly 22 years to overpay £35k at an extra of £133 a month.

BikingBud

Use this tool to work out the figures for current payment schedule, Mortgage1 and overpayment, Mortgage 2:

http://www.locostfireblade.co.uk/spreadsheet/Index.html

Also as you are overpaying the capital element is being paid off more rapidly. If you overpaid and kept the same payment you would follow something similar to the red line, however quite a few lenders seem to be adjusting the repayment so you still meet the same end date 25 years. If this applies to you your repayment profile might be some where between the blue and red:



The area between the red and blue lines is the cash saving you might generate but you should consider if you can get a better return elsewhere, eg the savings return is higher than mortgage interest.

The spreadsheet will draw graphs for the 2 models you build.

RelievedSheff

BikingBud said:

Use this tool to work out the figures for current payment schedule, Mortgage1 and overpayment, Mortgage 2:

http://www.locostfireblade.co.uk/spreadsheet/Index.html

Also as you are overpaying the capital element is being paid off more rapidly. If you overpaid and kept the same payment you would follow something similar to the red line, however quite a few lenders seem to be adjusting the repayment so you still meet the same end date 25 years. If this applies to you your repayment profile might be some where between the blue and red:



The area between the red and blue lines is the cash saving you might generate but you should consider if you can get a better return elsewhere, eg the savings return is higher than mortgage interest.

The spreadsheet will draw graphs for the 2 models you build.

Our lender has just recalculated our repayment due to our overpayments. They do this every annual review. 

They have decreased our monthly contractual payment by £25 per month. We have just increased our overpayment by that same amount taking it from £405 per month to £430 per month so that we are paying the same amount each month as previous.

They will do the same again this time next year and we will just adjust the overpayment again.