Need some help please on overpaying

mylifemyrules

Hi,
I want to start overpaying my mortgage I owe 129000 with 31 years to go and have a fix rate for 5 years with Halifax. If I overpay monthly but keep the term the same will it effect me switching to a new deal in future with Halifax?  What usually happens please. Thank you 

Hoenir

Overpaying simply reduces the debt owed quicker. As the amount you owe reduces so will the interest charged every month. At the end of the fixed rate term. Halifax will offer you a choice of new options. The standard monthly amount will be recalculated to repay the debt then owed over the remaining term of the mortgage. Continue to overpay and you'll continue to accelerate the speed with which the debt reduces. 

born_again

mylifemyrules said:

Hi,
I want to start overpaying my mortgage I owe 129000 with 31 years to go and have a fix rate for 5 years with Halifax. If I overpay monthly but keep the term the same will it effect me switching to a new deal in future with Halifax?  What usually happens please. Thank you 

You would need to ask Halifax, as some reduce term & others just amend the amount due each month, keeping same term. 
Crops up a lot. 👍

As to switching. No effect in getting a new deal. End of the day, you owe, what you owe.

mylifemyrules

If I'm keeping the term the same but overpaying say £300 a month what happens with my mortgage? Am I still benefiting? Will my payments just go down when I get a new deal as I'll owe less? 

silvercar

You can calculate the effect here. Overpaying reduces your interest, so if you keep the mortgage monthly payments the same you will be reducing the capital owed.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

silvercar

With your figures and an assumed interest rate of 4.5%, you get the following result:

Overpayment saving: (in interest alone) £58,190

Debt cleared: 14 years and 11 months earlier

amnblog

No, it does not effect switching to a new deal. 

Hoenir

mylifemyrules said:

If I'm keeping the term the same but overpaying say £300 a month what happens with my mortgage? Am I still benefiting? Will my payments just go down when I get a new deal as I'll owe less? 

Systems are designed to ensure that mortgages are repaid over their contractual terms. Yes, your fixed repayments will fall. Doesn't stop you from overpaying though. Think of it as rolling a snowball. Starts small but progressively builds up. 

doodling

Hi,

Broadly mortgage companies do one of three things with overpayments:

1. They reduce the term (but not necessarily the contractual term which can sometimes mean you have the opportunity of underpayments in the future).

2. They reduce the payments you make, keeping the term the same.

3. They don't do anything visible at all until the next point the mortgage payments are recalculated (e.g. at a rate change) when they will be taken into account in the new payments.

Sometimes you have a choice as to which of the above happens, sometimes it depends on the size of the overpayment made and sometimes you get whatever the mortgage company allows you.

In all cases however, you are reducing the amount of interest you pay (assuming that you have a mortgage where interest is calculated daily - most are nowadays).

Whether it is worthwhile depends on whether you can earn more money in an alternative investment (e.g. savings account, share investment, etc.) than the interest you pay on that amount of debt in the mortgage. 

RelievedSheff

mylifemyrules said:

If I'm keeping the term the same but overpaying say £300 a month what happens with my mortgage? Am I still benefiting? Will my payments just go down when I get a new deal as I'll owe less? 

As you are with the Halifax they will recalculate your repayment annually on the anniversary of when you took out the mortgage to ensure that you keep the same term.

You will need to go online and change your repayment amount again to include your overpayment.

At the end of your fixed term you will owe a lesser amount than if you had not made the overpayments. At that point you can either choose a new product with the Halifax or remortgage to a new lender.

mylifemyrules

Thanks everyone, I think I will put £200 towards the mortgage and save £100 in a savings account monthly and while I'll still end up with the same term my mortgage payments will be lower. I think that's how it will work anyway!