Lump sum or monthly payment? Whats best?

moneysteward · 15 November 2018 at 8:57PM

Evening All

Just found this site and am amazed at the wealth of information of all things money related.

Im just wondering what youd do in my situation and why.

We have a £90,000 mortgage on a £320,000 house with 10 years left to pay. Mortgage is with the Co-Op on a fixed rate for another 3 years. Monthly payment is (from memory) around £800 and we over pay about £600 per month.

However six months ago I overpaid £7000 in a lump sum and it brought my monthly payment down. The monthly overpayments have no effect on the monthly payment - if that makes sense!!

So Im wondering should I continue to overpay monthly or save up and make a once a year lump sum payment. I did ring them to ask this question but they told me to go see a mortgage advisor!! I just want to figure out the quickest way to get it paid off.

Many thanks

A_Frayed_Knot · 16 November 2018 at 12:23AM

Hello and Welcome

1st of all, I would find out the limit in overpayments allowed in a year and what the penalties would be if over-reached that limit.

I would then find out when in the Year o/p's start, and thirdly;
Find out how they charge interest - daily, monthly, or What - that would then give you an answer as to whether you would overpay asap or save up then o/p in a lump sum. Which would also depend on your mortgage interest rate charged v the interest rate you gain by saving your overpayments then paying as a one of overpayment.

I hope you followed that ok.
And don't take a 1/2% or 1% drop and dismiss it, - I went from 4.04% to 1.89% and practically halved my interest amount being added every month :money: - I also let the old rate go on for about 1 1/2 years before actually working it all out :mad:

Good Luck.

Lump sum or monthly payment? Whats best?

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free