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  • FIRST POST
    • w00519772
    • By w00519772 10th Oct 18, 5:08 PM
    • 1,255Posts
    • 214Thanks
    w00519772
    Reduce Term when making overpayments
    • #1
    • 10th Oct 18, 5:08 PM
    Reduce Term when making overpayments 10th Oct 18 at 5:08 PM
    I have made regular overpayments on my mortgage over the last one year. I am trying to understand the difference between:

    1) Reducing the term of my mortgage
    2) Not reducing the term of my mortgage

    My first mortgage payment ever was 541. Say my mortgage payments over the first 12 months were as follows:

    1) 521
    2) 518
    3) 513
    4) 508
    5) 501
    6) 497
    7) 492
    8) 489
    9) 486
    10) 482
    11) 477
    12) 472

    The mortgage payments have decreased each month because I have made overpayments and not reduced the term. I am trying to calculate how much I have lost (due to interest payments) by not reducing the term. Here are my calculations:

    (541-521)+(541-518)+(541-513)+(541-508)+(541-501)+(541-497)+(541-492)+(541-489)+(541-486)+(541-482)+(541-477)+(541-472)=536
    (3.25/100)*536=17.42

    Have I lost approximately 17.42 in interest payments by not reducing the term and keeping to my original monthly payment? I was expecting it to be more as I have found lots of posts on here where it is strongly advised to reduce the term.
Page 1
    • zx81
    • By zx81 10th Oct 18, 5:11 PM
    • 22,072 Posts
    • 24,062 Thanks
    zx81
    • #2
    • 10th Oct 18, 5:11 PM
    • #2
    • 10th Oct 18, 5:11 PM
    No. Less than half that, as interest is calculated daily, and the large underpayments are in the later, more recent months.
    • Typhoon2000
    • By Typhoon2000 10th Oct 18, 8:10 PM
    • 977 Posts
    • 491 Thanks
    Typhoon2000
    • #3
    • 10th Oct 18, 8:10 PM
    • #3
    • 10th Oct 18, 8:10 PM
    Ideally you would want to keep the payments the same every month. So if the mortgage payment goes down by x the next month, over pay by 541+x.
    Your still paying less interest my overpaying as you are though.
    • Thrugelmir
    • By Thrugelmir 10th Oct 18, 8:15 PM
    • 63,137 Posts
    • 56,034 Thanks
    Thrugelmir
    • #4
    • 10th Oct 18, 8:15 PM
    • #4
    • 10th Oct 18, 8:15 PM

    The mortgage payments have decreased each month because I have made overpayments and not reduced the term.
    Originally posted by w00519772
    Has your monthly direct debit been recalculated every month?
    "'The true investor . . . will do better if he forgets about the stock market and pays attention to their dividend returns and to the operating results of their companies.'" - John Bogle
    • bigstevex
    • By bigstevex 10th Oct 18, 8:32 PM
    • 844 Posts
    • 383 Thanks
    bigstevex
    • #5
    • 10th Oct 18, 8:32 PM
    • #5
    • 10th Oct 18, 8:32 PM
    Weird, mine only gets recalculated when the rate changes, I overpay every month a set amount and pay the same set amount for X months


    Halifax
    • w00519772
    • By w00519772 11th Oct 18, 7:04 PM
    • 1,255 Posts
    • 214 Thanks
    w00519772
    • #6
    • 11th Oct 18, 7:04 PM
    • #6
    • 11th Oct 18, 7:04 PM
    Has your monthly direct debit been recalculated every month?
    Originally posted by Thrugelmir
    My monthly direct debit has reduced each month due to the overpayments.
    • getmore4less
    • By getmore4less 11th Oct 18, 9:44 PM
    • 35,851 Posts
    • 21,946 Thanks
    getmore4less
    • #7
    • 11th Oct 18, 9:44 PM
    • #7
    • 11th Oct 18, 9:44 PM
    It makes a tiny difference, all that matters are the total payments.

    Some lenders reduce the payment as if they don't it includes an overpayment that counts towards max overpayments before ERC kicks in.
    • kahinaj
    • By kahinaj 12th Oct 18, 8:19 AM
    • 4 Posts
    • 1 Thanks
    kahinaj
    • #8
    • 12th Oct 18, 8:19 AM
    • #8
    • 12th Oct 18, 8:19 AM
    I can't geat my ahead around whether to reduce my mortgage term or reduce my monthly payments. As I understand it reducing the term will save me on not paying interest on however many years I reducee the term by. However would I be right to presume my monthly payment will go up?
    • takman
    • By takman 13th Oct 18, 3:56 PM
    • 3,785 Posts
    • 3,467 Thanks
    takman
    • #9
    • 13th Oct 18, 3:56 PM
    • #9
    • 13th Oct 18, 3:56 PM
    I can't geat my ahead around whether to reduce my mortgage term or reduce my monthly payments. As I understand it reducing the term will save me on not paying interest on however many years I reducee the term by. However would I be right to presume my monthly payment will go up?
    Originally posted by kahinaj
    If you overpay and reduce the term it will mean your monthly payments stay the same.
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