C&G Overpayments

Unclepetey

I have just taken out a C&G repayment mortgage (base rate +0.58% tracker).

I want to start making monthly overpayments and can apparently do this on one of two bases:

1. Payments which do not decrease the mortgage's term but instead reduce the monthly payments due next time the interest rate on the mortgage changes; or

2. Payments which reduce the mortgage term (although the reduction needs to be agreed in advance by C&G). This option also attracts a fee - though don't know what this is yet.

Under either option interest is calculated daily so any overpayments will immediately reduce the interest due.

Any thoughts on these 2 options? We will definitely not be paying this mortgage off before we move house next year so presumably it doesn't matter that the term is not being reduced under option 1?

Any advice greatly appreciated!

dubaiscot

Hi there - I too have a C&G mortgage which I am overpaying. I believe that the overpayments go straight to the capital amount, however the term stays the same - i.e. the monthly minimum payment continually drops.

I think this is better becasue in the event of an issue where I am no longer able to make overpayments, I just revert to the regular monthly payment.

If I reduced the term of the loan, then I believe i would not have this flexibility.

I'll watch this thread with interest!

Fur156

I have a mortgage with the Halifax, If I pay my normal monthly payment then pop into a branch and pay an overpayment, it comes off the capital and reduces my mortgage term.
If I cannot afford an overpayment that month, I just pay my normal payment.
I would like to be mortgage free no later than an age of 55, Im 27 now.
The mortgage is over 35 yrs so I have alot of work to do.

JimmyTheWig

I don't think that it is worth paying a fee. What a waste of time.

But there is a psychological element to it.
Assuming you go with option 1 your monthly repayments will drop. What will you do with this extra money each month? If you are just going to squander it then you haven't really gained much. (I'm assuming that you don't need that extra to live on as otherwise you wouldn't be making an overpayment now.)
The best thing to do would be to go with option 1 and then put the extra money each month towards your next overpayment. That would give you the best of all worlds. But would only work if you were organised enough to do it.

JimmyTheWig

Incidentally, what's your mortgage rate?

motch

JimmyTheWig wrote: »

Incidentally, what's your mortgage rate?

OP states base rate + 0.58% on first line.

I make it 5.58%

kassytbag

Hi, i too have a mortgage with c & g - i made a large overpayment two years ago and reduced the term of my mortgage - i didnt have to pay a fee at all - like you i am on a tracker (0.45% above bank of eng base rate) as far as i am aware you do not have to pay a fee to overpay - unless they have introduced this very recently - let me know!

JimmyTheWig

motch wrote: »

OP states base rate + 0.58% on first line.

I make it 5.58%

Thanks, I missed that.

Right, then there's an even better way to do it.
DON'T overpay your mortgage!

Set up a new regular savings account with the Halifax. Pay the spare money into there instead of your mortgage and get 10% interest.
Even if you are a higher rate tax payer this will get you more interest than you would save on your mortgage.

Then when the year is up make a lump sum overpayment on your mortgage or stick the money into a high interest savings account, depending on your income tax position.
Remember if you are married to hold the savings accounts in the name of whoever pays less tax.

mummyd_2

hi there
we overpaid our g+c mortgage by £10000 last month,
we asked for our payments to stay the same so they automatically reduced our term by 4 years.
this cost a £10 fee
hope this helps

Unclepetey

Thanks everyone for the helpful replies.