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overpayment on mortgage, is this right??

(10 Posts)
littlemonkeychops Fri 05-Jul-13 13:55:54

A few weeks ago i made an overpayment on our mortgage for the first time. Not a massive sum but was thinking if we did this every year it would add up.

I was expecting that our payments would stay the same but that the amount of interest would go down slightly, meaning we'd be repaying a smidge more of the capital each month and thus shorten the term.

I've had a letter today that just says thanks for your repayment of x, your monthly payments will bd reduced by £7 a month.

That's not what i was expecting and presumably means that this reduction is instead of refucing the interest payment and shortening the term? Can i ask them to do it the way i was expecting instead or do i not get a choice?

Hope that makes sense. Does anyone know? I want to get it straight in my head before i ring them.

Thanks.

QueenBoudicea Fri 05-Jul-13 14:03:32

Yes - call them up and say you want your monthly payments to remain the same.

littlemonkeychops Fri 05-Jul-13 14:12:35

Thanks Queen - i am ok dealing with banks etc when i know i have it straight in my head. I'll call them now.

dotty2 Fri 05-Jul-13 14:14:06

With ours we can choose what we want them to do, but the default if you don't specify is to reduce payments, not the term. Guess more people must want that. Phone and ask!

Talkinpeace Fri 05-Jul-13 17:44:23

Do not forget that if your mortgage is IO you are not normally paying off any capital at all ... have a look at the mortgage calculator sheet I've posted for all to use
www.mumsnet.com/Talk/site_stuff/1715581-Cost-of-credit-cards-and-mortgages-the-spreadsheets?msgid=40118093#40118093

Lonecatwithkitten Sat 06-Jul-13 12:39:28

Also worth checking mortgage documents that you can overpay regularly as well as lump sums and also if there is a maximum overpayment per year.

QueenBoudicea Thu 11-Jul-13 14:56:52

Just wanted to say thanks monkeychops as your thread reminded me to make an overpayment on my mortgage. I've set my payments to remain at the current level and will now pay off my mortgage 2 years 3 mths earlier - result grin

If I do the same next year I'll have paid the mortgage off before I'm 50.

littlemonkeychops Fri 12-Jul-13 19:44:13

Ooooo Queen, paid off by 50, brilliant! My overpayment has knocked off 5 months off :-)

QueenBoudicea Sat 13-Jul-13 12:55:46

Excellent - it all makes a difference doesn't it?!

We were nearing the end of our fixed rate, so I called up to get another deal. Long story short we went from £880 PCM to £760 PCM. We were overpaying by £200 PCM anyway so I asked to keep payments the same. This will take another year off the mortgage so it'll be paid off by the time the eldest DC turns 18.

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