Mortgage Overpayments

Lizzybop

We have recently started to make some overpayments on our mortgage in an attempt to become mortgage free in less than the 25 year term.

This is my query:
Currently we have our mortgage with Nationwide, it is split into 3 'bits'. The big one is approx £50k, the middle one is approx £35k and the little one is approx £15k making a total of approx £100k still outstanding - according to our last statement.

All 3 parts are on the same fixed rate deal, same interest rate same terms etc, it's just that they are 3 accounts.

We have the facility to make overpayments against all 3 accounts every month up to £500 each. (please note £1500 per month extra is way beyond our finances).

So far we have made overpayments when we can totalling £2500, but have put them all against the smallest account only, and requested Nationwide to bring down the mortgage term, rather than decrease the monthly payments.

Hopefully this is all still making sense!!:D

Do you think it makes any difference which of the accounts we put the overpayments against? We chose the smallest so that we could see the end of it sooner than the others. Do you think we should spread the overpayments over all the accounts??

Any advice/thoughts greatfully recieved.

Many thanks

moneysaver2b

Hi

We are in the same position as you. I don't think it matters which "account" you pay the money off - as long as they have the same interest rate and the same length of time to run. Ours are split into 3 also but one of the accounts was due to finish sooner than the other 2 and was a slightly higher rate so we paid it into that one (which we are paying off next month - hurrah!) I think I would be inclined to do the same as you and pay it off the smallest one.

Wyndham

I assume that the rates on all three will stay the same i.e. you won't get to the end of the deal on one of them and that rate go up while the other two stay the same? It's always worth paying off the highest rate first, but in your case it really doesn't seem to matter. I think I'd be tempted to pay off the smallest one first as well to get rid of it - it will possibly feel better to have two rather than three even though in 'real terms' it will make no difference.

Good luck!

Lizzybop

Thanks for that, I'm inclined to just keep doing what we're doing.

I'm just pleased that someone could understand what I wrote!!!!

aliportico

I'm in the same position (NW, 3 mortgage accounts, slightly different numbers), and have wondered about this. I tried putting it into the mortgage overpayment calculators, and if I overpay say £200 a month on the whole thing, it gets paid off in 10 years rather than 13 (numbers not exactly accurate!), but if I picked one then it would be paid off in 6 rather than 13. But then I didn't know how much would be left on the other two chunks in 6 years time in order to continue the calculation. Thinking about this too much perhaps, lol!

Anyway, what I settled on, is to overpay into each account in rotation, month by month. Seemed the fairest option in my mind!

Although actually I don't think it can make much difference - if the interest rate on all of them is the same, then the interest being paid is the same as the interest would be if it were one big amount, so shouldn't matter.