Advice on mortgage overpayments & timing?

[Willber]

I intend to start overpaying my mortgage and would like some advice on how best to time it so that I maximise the savings.

Regular overpayments are made by standing order and the amount owed and interest I need to pay is calculated monthly on the 1st of the month after the month in which the overpayment is made, my current normal payments come out on 20th of each month.

Lump sum payments are calculated daily on the day after the lump sum is received, lump sums can only be paid by cheque.

So am I right in thinking it's best to set up a standing order for the overpayment on say the 25th of each month so that it reaches the account in time for calculation on the 1st of the following month?

Or do I stick the amount I can overpay into a savings account and then pay off a lump sum each year or every 3 months?

Thanks

Edited by Willber on Wednesday 11th March 14:51

[Salgar]

Willber said:

I intend to start overpaying my mortgage and would like some advice on how best to time it so that I maximise the savings.

Regular overpayments are made by standing order and the amount owed and interest I need to pay is calculated monthly on the 1st of the month after the month in which the overpayment is made, my current normal payments come out on 20th of each month.

Lump sum payments are calculated daily on the day after the lump sum is received, lump sums can only be paid by cheque.

So am I right in thinking it's best to set up a standing order for the overpayment on say the 25th of each month so that it reaches the account in time for calculation on the 1st of the following month?

Or do I stick the amount I can overpay into a savings account and then pay off a lump sum each year or every 3 months?

Thanks

Edited by Willber on Wednesday 11th March 14:51

That all depends on how much interest you can generate in a savings account. It's always worth overpaying ASAP unless you can earn enough in your savings account, in which case it is never worth overpaying (in my opinion)

Here is a simple calculator to see how much you need to save:

http://www.moneysavingexpert.com/mortgages/savings...

This is a good guide too.

http://www.moneysavingexpert.com/mortgages/mortgag...

Essentially, you can easily calculate how much interest you would save by overpaying vs how much interest you would gain by saving, take the difference and if the saving is higher, don't overpay, and if the money you save from overpaying is higher, overpay as soon as possible.

And from what you're saying (interest reduction for lump sums is calculated the day after receiving?) Is there anything stopping you paying a lump sum in monthly?

[Willber]

Thanks for your reply.

I will definitely be overpaying regardless, it was more a question of maximising the saving in interest by timing the overpayment correctly.

You raise a valid point however regarding what is classed as a lump sum overpayment, I will have to ask the lender what their terms are.

[rossub]

I just make my overpayments on the day I'm paid each month!