Are weekly / fortnightly mortgage overpayments better?

Shaboogamoo

I'm mid-divorce and find myself 52 years old with a new mortgage of £111k over 18 years (on a 2yr fix at 3.63%)

I plan to overpay my mortgage, and interestingly have just come across something online which says that making the overpayments fortnightly, or even weekly, saves you more in interest than doing it monthly. Is that right?

Report

tacpot12

Mortgage interest is generally calculated on a daily basis, so repaying more frequently does in theory save you more money. However, many lenders have rules about when they will allow you to make repayments, so you may not be able to make payments in excess of your monthly amount that frequently. You need to ask your lender what their rules are.

Woodstok2000

It might depend on your mortgage, but I don't see how that could be the case unless you were also getting paid fortnightly or weekly.

I get paid on 25th of the month, interest is calculated daily. Repaying an extra £x00 on 25th means the whole next month im accruing less interest. Splitting that overpayment into 2 or 4 just means more interest accrued each period until the last one.

I guess if you weren't confident with your budget and wanted to overpay at the end of the month (so on 24th for me) I would be better off overpaying more frequently, but would the bank allow it?

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6673922/are-weekly-fortnightly-mortgage-overpayments-better

Interest is calculated daily so the earlier you make payment the more you save so there is a logic to paying it more frequently if you are paid weekly.

You would need to check with your mortgage provider to ensure they are ok with 52 payments a year though, I have vague memories of some explicitly limiting the number of payments that can be made

Newbie_John

Again someone watched some American TikTok/YouTube.

Overpayments every 4 weeks are better than monthly only because you end up making 1 more payment.

Weekly.. just put your "overpayment" money to savings account over 3.6% and then use it to overpay whenever - same effect (just keep limits in mind).

MWT

https://forums.moneysavingexpert.com/discussion/comment/82048718#Comment_82048718

Exactly, this has merit in the US where it is still relatively common to get paid every two weeks.

The real story here is match your payments to how often you are paid…