mortgage overpayment timing
mortgage overpayment timing
Author
Discussion

egor110

Original Poster:

17,533 posts

219 months

Saturday 11th June 2011
quotequote all
If i want to overpay my mortgage and it's paid 5th each month would it make any difference if pay pay the extra before or after the 5th?

TooLateForAName

4,888 posts

200 months

Saturday 11th June 2011
quotequote all
depends on the mortgage. Different banks have different rules. Sometimes it counts immediately, sometimes credited on particular days or at the end of a period.

Check with your bank.

vinnie83

3,367 posts

209 months

Sunday 12th June 2011
quotequote all
The majority of mortgages now calculate interest on a daily rest basis, which means that as soon as you pay, the interest is calculated the following day on the new balance.

Just give the lender a call and ask them to be sure though.

egor110

Original Poster:

17,533 posts

219 months

Monday 27th June 2011
quotequote all
I phoned them and they said is makes no difference but i do have the following 3 options, which should i go for? All i want to do is overpay by £150 a month on a 68k mortgage, current monthly payment is £503.

Pay off your mortgage earlier by reducing your mortgage term.
Reduce your future monthly repayments.
Keep your existing payment and term 'as is'. At the next natural mortgage payment change, i.e. interest rate change, your repayment will be automatically recalculated

davepen

1,477 posts

286 months

Tuesday 28th June 2011
quotequote all
I was on the SVR (bank_rate+2%) with Nationwide. When the rate started to dropped I said make the payment a fixed ammount - so say £653pcm in your case. At each step down in the bank rate the ammount of over payment effectivly increased, but my monthly payment/budget was still the same. Of course as the rate can only really go up, it would be the opposite case - until the required payment is greater than your fixed ammount.

I effectively took the 3rd option - which I think meant that I had a type of offset mortgage - where I could have taken some money out, or even taken a mortgage holiday (ie move to option 2). In the end it became option 1 - I'd reduced the balanced and hence remaining term to zero.

vinnie83

3,367 posts

209 months

Tuesday 28th June 2011
quotequote all
I personally would reduce the term - you will notice no difference in a few pounds saving a month, but in a few years time how nice would it be to have a year more mortgage free - that would be noticeable!

seaninog

513 posts

205 months

Tuesday 28th June 2011
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I read this in the Irish Times last April and thought it was worth bookmarking. I haven't gone through their math but if the numbers stack up then we should ALL be making two monthly mortgage payments

http://www.irishtimes.com/newspaper/pricewatch/201...

Shaun350z

56 posts

170 months

Tuesday 28th June 2011
quotequote all
Just ask them to take the extra £150 with your regular payment and then reduce the term.

Reducing the monthly payment is pointless unless you are making a large one off over payment, in your case and depending on the rate you are being charged you would see a monthly reduction of about 50 pence, however by reducing the term and keeping the payment the same this would be an extra 50 pence that you are then paying off the mortgage the following month.

Lastly, I assume that you will not be charged any redemption penalty on this over payment?

egor110

Original Poster:

17,533 posts

219 months

Tuesday 28th June 2011
quotequote all
With nationwide i can overpay up to £500 a month, i've decided to go with the term option.
Thanks for your opinions.

Stevenj214

4,941 posts

244 months

Tuesday 28th June 2011
quotequote all
seaninog said:
I read this in the Irish Times last April and thought it was worth bookmarking. I haven't gone through their math but if the numbers stack up then we should ALL be making two monthly mortgage payments

http://www.irishtimes.com/newspaper/pricewatch/201...
A quick scan through it suggests to me that for a lot of people, switching to fortnightly payments would have the exact opposite effect.

IainT

10,040 posts

254 months

Tuesday 28th June 2011
quotequote all
egor110 said:
I phoned them and they said is makes no difference but i do have the following 3 options, which should i go for? All i want to do is overpay by £150 a month on a 68k mortgage, current monthly payment is £503.

Pay off your mortgage earlier by reducing your mortgage term.
Reduce your future monthly repayments.
Keep your existing payment and term 'as is'. At the next natural mortgage payment change, i.e. interest rate change, your repayment will be automatically recalculated
When we looked at doign this there were costs associated with anything that involved changing the regular payment. The only option that was free was to send a cheque every month.

egor110

Original Poster:

17,533 posts

219 months

Tuesday 28th June 2011
quotequote all
It only incurs a fee if i pay in over £500 extra a month with nationwide.

IainT

10,040 posts

254 months

Tuesday 28th June 2011
quotequote all
egor110 said:
It only incurs a fee if i pay in over £500 extra a month with nationwide.
The fees are for changing things like term or ragular payments - not for manual overpayments. At least that's what my lot told me.