Paying a bit extra each month? Good or bad idea?

Andy_ArT_Trigg

I just enquired at The Halifax, how much money I'd save if I started paying an extra £10 or £20 a month off my mortgage. I only have 3 years and 5 months left BTW.

I was quoted figures which after getting my calculator out appear to mean I would not save any money at all.

I have a part endowment, part repayment mortgage and she said that proportion of my payment each month that is for the repayment part is £130.11.

If I pay an extra £20 a month I will clear the repayment part 5 months early.

This means I will save 5 months payments = £650

BUT, I will have paid £720 extra so I'd be worse off.

This can't be right can it? Also, is it a good idea to pay extra on a mortgage each month or would the money be better invested elsewhere?

Robert_Sterling_3

In my opinion these figures do not make sense.
They are not very far out but they are slightly wrong.

We are not talking big potatoes here

MarkyMarkD

Forget their figures.

Overpaying WILL save you money whatever their figures seem to suggest.

Whether you pay off the amount monthly or annually depends if your mortgage is on annual or monthly/daily rest.

If it's annual, then you want to pay money in just before the annual resetting of the interest bearing balance - often but not always on 1 Jan. Not sure what it is for Halifax but they will tell you.

If it's monthly/daily, you might as well pay it off as soon as you can, i.e. whenever you have the spare money.

All the above applies if and only if there are no early repayment charges applicable to over-payments. Even if there are, many lenders allow you to make relatively small overpayments (<£500 pm with Nationwide, for example, or 10% of balance with many lenders) without incurring any penalty.