Has anyone looked into this, or do some of you currently do it.

I've been suprised by the amount that can be saved.

Have a look here (http://www.channel4.com/4money/mortgages/features/overpayment_calculator.html).

On a 50k mortgage (as an example) overpaying by £200 would save over £30,000 and cut 17 years of the length of the mortgage (25 years to start with).

Cheers Cyclone.:thumbsup:
I did know about this & indeed played with the HSBC mortgage adviser & his laptop about 2 years ago.
He gave me an impressive projection. :wow:

I could reduce my 25yrs to 10 by overpaying....



BEWARE!!!
Procrastination is not only the thief of time - it robs you of interest payments too.

Do it today! :clap:

We've got a mortgage where you pay more (a couple of quid) each year, it knocks about 10 years of the length of the mortgage and god knows how much interest. Only 12 more years to go now :)

Paying weekly also helps (provided they calculate interest ona daily basis)

Good way to do it if you remortgage to a lower rate is to continue paying the same amount. That way you don't even 'realise' your overpaying

If my house ever goes through I'm getting an interest only mortgage (just while I'm a bit skinter) that I can over pay up to 10% on. It's only a good idea I think if you're quite good at saving money - for me it just means that when I first move in and have to pay out a lot in furniture and stuff I don't have to pay as much each month but at the end of the year I pay off from my savings, after 2 years can get a repayment mortgage.

I don't know the figures off the top of my head but if you can afford it I think you'd save more money by overpaying than by having the same amount of cash in a savings account.

Originally posted by Jayne
If my house ever goes through I'm getting an interest only mortgage (just while I'm a bit skinter) that I can over pay up to 10% on. It's only a good idea I think if you're quite good at saving money - for me it just means that when I first move in and have to pay out a lot in furniture and stuff I don't have to pay as much each month but at the end of the year I pay off from my savings, after 2 years can get a repayment mortgage.

I don't know the figures off the top of my head but if you can afford it I think you'd save more money by overpaying than by having the same amount of cash in a savings account.

a hell of a lot more.

I know somebody who has one of those all-in-one accounts where the mortgage is effectively a huge overdraft, but at mortgage rates.

She discovered that it's possible to apply for '0% for x months' credit cards and transfer thousands of pounds worth of this overdraft onto a credit card. When the 0% period is up, it just gets transferred onto to a new 0% card.

This has racked her credit rating through the roof, because she always pays on time, and has saved a fortune in interest charges on the account. Of course, the better her credit rating, the more credit she is granted on the next round of credit cards!!! :D

As far as I am aware you need to state that yopu are making a capital repayment each time you do it. Especially if you are just doing it over the counter each time.

That way it is processed as a payment that comes off your capital and not just your interest, it is a seperate payment from your monthly payement and needs to be marked as such.
Somake sure you state that or pre arrange it with your bank/lender.

Originally posted by bonny
As far as I am aware you need to state that yopu are making a capital repayment each time you do it. Especially if you are just doing it over the counter each time.

That way it is processed as a payment that comes off your capital and not just your interest, it is a seperate payment from your monthly payement and needs to be marked as such.
Somake sure you state that or pre arrange it with your bank/lender.

I think it depends completely on the lender and what specific mortgage you have with them.
Marking certain payments as for capital or otherwise doesn't make any sense with a repayment mortgage, only with an interest only mortgage. A repayment mortgage has just one figure, that which you owe. You reduce it by paying, they increase it by adding interest. The quicker you get the balance down in the early years, the less interest they get to add (particularly when you work out how it compounds over 25 years).

We overpay by a couple of pounds per week, and instead of taking 25 years to pay our mortgage, it will take 12 years! Each year the payment goes up by £1 to £2 automatically.

But - we also pay weekly, which means that the payment goes down weekly, which then means interest is charged on a smaller amount per week.

The interest rate is slightly higher than standard - but i'd rather clear my mortgage this way!

Recommend this to anyone - Yorkshire Bank by the way.

Originally posted by Strix
I know somebody who has one of those all-in-one accounts where the mortgage is effectively a huge overdraft, but at mortgage rates.

She discovered that it's possible to apply for '0% for x months' credit cards and transfer thousands of pounds worth of this overdraft onto a credit card. When the 0% period is up, it just gets transferred onto to a new 0% card.


Those types of account (Offset) can be good, and it's suprising how much you can save, even if you have very little savings, just by using your salary, in between it coming into the account and going out on bills.

Are the people who pay weekly being paid weekly themselves?

Originally posted by Andy
Those types of account (Offset) can be good, and it's suprising how much you can save, even if you have very little savings, just by using your salary, in between it coming into the account and going out on bills.

Beware though. The interest rate on them is usually higher to start with ;)

Weekly mortgage payments

No - i get paid monthly and transfer mortgage money into separate account - which then is taken out weekly by Yorks Bank.

Quality link that Cyclone.
I must admit I've never really thought about it.

Get this my mortgage loan is £144000 and we pay about 5.8% interest rate over.... wait for it.....

...35 years.

Think I'm gonna up my payments by a fair few quid (maybe £200) to get it paid of quicker and save some serious coinage.

Cheers :thumbsup:

:confused: Bu surely the sooner it gets into your mortgage account the more benefit it will be to you, Harley? Why not put it all straight in if it's there and available?

It's something to do with making 52 payments per year, and the interest being recalculated per week. It was very clear at the time i did it - now my head hurts!!!!!

Slick these mortgage advisors arent they?;)

If you pay your mortgage at the end of the 'month' you end up paying £xxx

You can reduce this by making 4 smaller payments earlier!

Great - so you do that :thumbsup:

But if you already have that money available, why not just pay it all early, and save even more :thumbsup: :suspect:

Interesting (pardon the pun :rolleyes: ) what they leave out, eh? ;)

Just thought - it's all wrapped up in a package isn't it?

Can you pay most at the beginning of the month, and £1 the other weeks?

Originally posted by Cyclone
I think it depends completely on the lender and what specific mortgage you have with them.
Marking certain payments as for capital or otherwise doesn't make any sense with a repayment mortgage, only with an interest only mortgage. A repayment mortgage has just one figure, that which you owe. You reduce it by paying, they increase it by adding interest. The quicker you get the balance down in the early years, the less interest they get to add (particularly when you work out how it compounds over 25 years).

It does make a difference. I have a repayment mortgage. A percentage each month goes to the capital and some to the interest. If I make an additional payment of say, £1000 without stipulating it is a capital repayment it will be processed as a normal monthly payment so some will go towards the interest.
Until recently Iwas making these payments for customers in a bank.

Originally posted by bonny
It does make a difference. I have a repayment mortgage. A percentage each month goes to the capital and some to the interest. If I make an additional payment of say, £1000 without stipulating it is a capital repayment it will be processed as a normal monthly payment so some will go towards the interest.
Until recently Iwas making these payments for customers in a bank.

I'm sorry, but i really don't understand that.

If a normal monthly payment has been made, and then £1000 extra is paid, what interest can it go towards?

If it goes towards paying 'future' interest, then that reduces the overall balance immediately and has exactly the same effect, as the reason it's so beneficial to pay early is that the compound interest is avoided for that bit that you've repaid.

For example, at 5.7% PA over 25 years, £200 is worth £799.66.
So a £200 overpayment in month 1 of your mortgage saves you £599.66 - The saving drops a little every month (i've only calculated that as if interest were applied every year, in reality it may be applied at a much lower date as often as every day it makes no difference for that example though), so the same overpayment made in month 13 would save you £556.53 (or £43.16 less than a year earlier because there is only 24 years interest left to accrue).

My SO spoke to our mortgage provider today, and they advised us to send a fax through with the new repayment figure and it will take effect from next month. Initially we've gone for a figure that saves 11 years, early next year we'll increase it again which should leave us with 5 years left to pay at the new rate.

It basically boils down to the way it is input on the computer in the bank. certain codes are generated for payments. If I made a £1000 payment in a month it would assume that it was just a monthly payment and divide it into capital and interest. If I stated I wanted £600 of that to be a capital payment that would then be input differently and come off the top figure rather than a portion going towards interest.

If you make a prior arrangement with your bank, like you have done, that doesn't apply but if you want to do it randomly it does.

Repayment Mortgages
A repayment mortgage is paid back over a set number of years with interest. Each month you would repay part-capital and part-interest. As the mortgage reduces steadily over the years, the amount of interest payable also decreases. Therefore, over time, your monthly repayment will consist of an increasing amount of capital and a decreasing amount of interest.

http://www.houseweb.co.uk/house/buy/mortgage/repay.html

It doesn't make sense though Bonny.

Your monthly payment should cover all the interest that month and some of the capital. Therefore any over payment must go to capital as there is no interest left to repay.

It sounds like Bonny has one of those mortgages that has it's interest pre-calculated at the outset, so it is different to the ones you guys have :thumbsup:

Sorry, but that's as much as I know on that subject ;)

Originally posted by Andy
It doesn't make sense though Bonny.

Your monthly payment should cover all the interest that month and some of the capital. Therefore any over payment must go to capital as there is no interest left to repay.

Not really though as if you make a payment over the counter the computer assumes it is a continuation of your monthly payments, in advance unless you state otherwise. So you may go the next month to pay and you will just remain in advance with your payments without reducing your capital. Then this won't reduce your capital or interest to any benefit. You just need to make sure that you inform your bank of your intentions. Let's face it they are not in the business of giving money away and make it where they can. They rely on you taking the initiative when it comes to saving money, they don't offer you the option unless it benefits them. You know that as well as I do Andy.

Originally posted by bonny
Not really though as if you make a payment over the counter the computer assumes it is a continuation of your monthly payments, in advance unless you state otherwise. So you may go the next month to pay and you will just remain in advance with your payments without reducing your capital. Then this won't reduce your capital or interest to any benefit. You just need to make sure that you inform your bank of your intentions. Let's face it they are not in the business of giving money away and make it where they can. They rely on you taking the initiative when it comes to saving money, they don't offer you the option unless it benefits them. You know that as well as I do Andy.

I've not seen a mortgage where overpayments are an option, but the overpayment would not count against anything. In the scenario you suggest the money just sits there until it's counted as a regular payment, which if you stay ahead forever, won't be until you reach the end of the mortgage.
Any of the mortgages that allow regular overpayments surely take any extra off the capital, otherwise there would be no point in making an overpayment. And any other type of mortgage will mean you have to speak to them first as it's paid by direct debit (like we've had to do).

Originally posted by bonny
Not really though as if you make a payment over the counter the computer assumes it is a continuation of your monthly payments, in advance unless you state otherwise.

Then I think the computer has been programmes wrongly. I think it is very unfair if the bank is charging interest on an amount that is more than somebody owes. To the extent that the terms and conditions of the mortgage may be unfair.

You just need to make sure that you inform your bank of your intentions. Let's face it they are not in the business of giving money away and make it where they can. They rely on you taking the initiative when it comes to saving money, they don't offer you the option unless it benefits them. You know that as well as I do Andy.

Not with my bank - any over-payments are deducted from the capital. The bank kind of assumes people want to over-pay to reduce the term of their mortgage (that's why we offer the facility and advertise it as a benefit of out mortgages).

Originally posted by Harley
We overpay by a couple of pounds per week, and instead of taking 25 years to pay our mortgage, it will take 12 years! Each year the payment goes up by £1 to £2 automatically.

But - we also pay weekly, which means that the payment goes down weekly, which then means interest is charged on a smaller amount per week.

The interest rate is slightly higher than standard - but i'd rather clear my mortgage this way!

Recommend this to anyone - Yorkshire Bank by the way.

Thats who we're with, they are bit divvy at times, but generally they give good advice, unlike the Halifax who only offered us one type of mortgage, the one they wanted us to have, then later said they did the same one as the Yorkshire Bank, we should have asked for it.

I'll ask them about paying a full months worth in in one go, see what they say.

Originally posted by Andy
Then I think the computer has been programmes wrongly. I think it is very unfair if the bank is charging interest on an amount that is more than somebody owes. To the extent that the terms and conditions of the mortgage may be unfair.



Not with my bank - any over-payments are deducted from the capital. The bank kind of assumes people want to over-pay to reduce the term of their mortgage (that's why we offer the facility and advertise it as a benefit of out mortgages).

Don't you have to ask the customer to state wether they want to reduce the term or the monthly payments though?

If so then that would have to be pre arranged wouldn't it?

Originally posted by bonny
Don't you have to ask the customer to state wether they want to reduce the term or the monthly payments though?

If so then that would have to be pre arranged wouldn't it?

why would anyone overpay in order to reduce future monthly payments? Surely that would be the unusual behaviour and so should only be done on request.

Originally posted by Cyclone
why would anyone overpay in order to reduce future monthly payments? Surely that would be the unusual behaviour and so should only be done on request.
Plenty of situations cause people to want to do that! A few might be:
Expecting a baby and will be having time off work so want to reduce payments.

Career breaks.

Lots of other possible reasons too. Not everyone has exactly the same circumstances in life and at times people need to prepare to make cut backs!

most of the flexible mortgages that make overpayment easy also make it easy to underpay or take a payment holiday.

I'm not saying that you're proposition doesn't happen, just that I think it's far more likely that people pay extra in order to reduce the term (as this reduces the overall cost of borrowing).