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Overpayment Question
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Blue76
Posts: 22 Forumite
I have seen some posts on here regarding application of any overpayment to the capital or interest on your mortgage. I have a repayment mortgage and have made overpayments over the last four months although was unaware that I could specify whether these went to pay off the capital or the interest. Can someone please tell me the difference. I have checked my mortgage T &C's and it states payments are applied to interest first. I have also received some letters reducing my payment although contacted Nationwide to say I wanted the term reduced instead.
Thanks in advance
Thanks in advance
0
Comments
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I don't know about interest v capital, but be careful that your lender doesn't charge you each time you overpay to shorten the term - Halifax did charge me, so now I take the lower payment and add the difference to my overpayment!
po xx2010 MFW Challenge No. 112 Mortgage paid in full 27/08/10 I was MF!!!
But now I'm not - (Joint) Mortgage £104704.New MFW target £5000 overpayments by 31/12/2105 £400/£5000 = 8%SAVINGS TARGET - £25000 by 31/12/2015 £13643/£25000 = 55%No 17 Lewis Lane0 -
I have seen some posts on here regarding application of any overpayment to the capital or interest on your mortgage. I have a repayment mortgage and have made overpayments over the last four months although was unaware that I could specify whether these went to pay off the capital or the interest. Can someone please tell me the difference. I have checked my mortgage T &C's and it states payments are applied to interest first. I have also received some letters reducing my payment although contacted Nationwide to say I wanted the term reduced instead.
Thanks in advance
Good! Reducing the term and therefore keeping the payments the same is the best in terms of interest paid if you can afford to do it.0 -
I have seen some posts on here regarding application of any overpayment to the capital or interest on your mortgage. I have a repayment mortgage and have made overpayments over the last four months although was unaware that I could specify whether these went to pay off the capital or the interest. Can someone please tell me the difference. I have checked my mortgage T &C's and it states payments are applied to interest first.
If you're on a repayment mortgage, your normal monthly payments go towards paying off the monthly interest first, then the capital. Given that the building society is not going to set a monthly payment that means your loan amount actually increases (unless you specifically ask to make underpayments), this means that you're always paying off a little bit of the capital, even if you make no overpayments at all.
What this means in practice is that any overpayments you make will automatically come off the capital.I have also received some letters reducing my payment although contacted Nationwide to say I wanted the term reduced instead.0 -
Since you have a repayment mortgage, any overpayment automatically comes off the capital i.e. the total amount you owe.
However, when you make an overpayment one of two things can happen:
1. The term of your mortgage reduces. I.e. you continue to make the same standard payments every month over a shorter term.
2. The standard montly payments reduce and the term remains unchanged.
Since you are posting on the MFW board, to be MF quickest, you would opt for option 1.In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0 -
Hi
I found this thread quite useful
http://forums.moneysavingexpert.com/showthread.html?t=878549
and this one
http://forums.moneysavingexpert.com/showthread.html?t=895459Turn your face to the sun and the shadows fall behind you.0
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