Monthly 'step-up' repayments

N

Nostradamus

Registered User
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Hi, with the interest rates cuts I'm looking at making monthly 'step-up' payments. I have my mortgage with First Active. I was under the assumption that these additional payments would reduce the mortgage balance outstanding, but having read the small print it appears that these payments are 'credited to the loan account, therefore reducing the interest' So it does not appear these payments would reduce the balance - only show as a credit on the account and reduce the interest. My questions are:

1. Can anyone confirm my understanding of this is correct?
2. If yes, does this defeat the purpose of making additional payments?
2. Is there more of a saving if these repayments did actually reduce the balance? That Karl Jeacle calculator doesn't appear to distinguish between these 2 eventualities..

Any advice much appreciated, especially anyone who has had dealings with FA in this regard..
 
You have to write to them telling them that you want the over payment taken off the capital rather than the interest. You can reduce the term by doing this.
 
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