overpaying

Westy29

Registered User
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Just a question regarding our mortgage. We are currently overpaying each month. We are re-paying a fixed amount so as the interest rate dropped the amount of the overpayment increased.

The 'extra' is coming off the capital but our maturity date has not decreased. If we reduced the maturity date or 'standard' repayments would increase yes?? This would be fine now but we dont want to be tied to it when rates rise again.

So from a point of view of reducing the amount of interest we pay over the course of the mortgage and reducing the term of the mortage is this the most efficent way of doing that.........by overpaying???
 
But if the overpayments are not reducing the term or the monthly payments, then that money is only 'resting' in your mortgage account.

I feel that the best thing is to built up the extra payments in a savings account then every six months or year, if all that sum is still free, then make a lumpsum payment to the mortgage and you have to be certain to instruct the bank to make a capital payment and ask for a new termination date of mortgage.
 
The 'extra' is coming off the capital

Savings account is good advice if you have the discipline to pay off the full amount at the end of the 6 months and not be tempted to dip into it for unforeseen emergencies.
 
KatieC the overpayments are coming off the capital. The 'standard' repayments are reducing based on the full term, ie smaller payments but same length of mortagage.

If we reduce the term the standard repayments will increase and we will be tied to them........thats my understanding anyway.

This way we reduce the capital amount each month with our overpayment. We are effectively reducing the term without actually changing it........I think.

Just wondering if this is the best way of doing things
 
Savings account is good advice if you have the discipline to pay off the full amount at the end of the 6 months and not be tempted to dip into it for unforeseen emergencies.

Why? Because the rate ill get in savings is better than the rate ill save on interest?? If thsi was the only reason I think id rather the peace of mind knowing my mortgage was being chipped away at each month
 
Yes, if you want flexibility and peace of kind then keep doing as you're doing.
 
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