Overpayment - Lump Sum vs Monthly?

Scoodle

New Member
Hi

After saving like crazy for the last few years, we’re now in the fortunate position that we can afford to pay a 10% lump sum off our mortgage (the maximum we can overpay with our bank - 10 year fixed).

However, a friend advised that it would be more beneficial to pay an extra 10% monthly instead. He says that you save more in the long run that way. Is this correct?

Surely it’s better to pay a lump sum off the capital & reduce the repayment amount enabling us to save more & hopefully pay off early once we have enough saved.

Are there any benefits to monthly overpayments vs a lump sum (other than access to savings) that I’m not seeing?

Thanks in advance!
 

dub_nerd

Frequent Poster
Unless the bank has some weird method of accounting, you can't save more money by reducing your mortgage in the future than by reducing it now.
 

username123

Frequent Poster
Giving the benefit of the doubt to your friend, perhaps they meant that rather than saving up the lump sum and *then* paying it in one go, they meant you should just overpay as you go, say E200 extra a month, rather than saving up the equivalent of E2400 and paying it at the end of the year. THats the only logic I can think of!
 

Connard

Frequent Poster
Giving the benefit of the doubt to your friend, perhaps they meant that rather than saving up the lump sum and *then* paying it in one go, they meant you should just overpay as you go, say E200 extra a month, rather than saving up the equivalent of E2400 and paying it at the end of the year. THats the only logic I can think of!
This is the only logic I can see too. If this is their logic, they are correct. The sooner you overpay the more you save.
 
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