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Mortgage overpayment lump sum or regular overpayments?

(9 Posts)
TwentyFourteen Mon 03-Mar-14 23:10:59

We are on fixed 5 years repayment mortgage rate of 2.49% on a hefty mortgage, question; is it better to pay off single lump sums or regular overpayments on capital repayment both keeping mortgage payments the same? The overpayment calculator on money supermarket is confusing me
as it looks like regular
monthly overpayments better than the same amount over one year but in one off lump
sum!

Hope someone can help clarify? Thanks in advance.

TwentyFourteen Mon 03-Mar-14 23:16:16

Wanted to add its one single lump sum annually v's regular monthly overpayments making up same amount as one lump sum! Hope that makes more sense, thanks

Splatt34 Tue 04-Mar-14 07:28:54

I think interest is usually calculated daily so it will depending if you make the lump dump at the start or end IYSWIM.

So �100 every month off the mortgage will.be better than putting it in a saving account every month for a year and then clearing �1200. BUT if you have �1200 upfront from a bonus or something it would be better to pay it all first. Does that make sense?

Obviously you need to check the t&c s to find out how much you are allowed to overpay.

LadyKooKoo Tue 04-Mar-14 09:33:37

It is hard to say what is best without knowing the amounts & full term. Try the MoneySavingExpert calculator, it is user friendly.

fanjobiscuits Tue 04-Mar-14 18:57:01

Lump sum now better than pavements over time. Eg £100 now saves interest on £100 immediately; £10/month for 10 months saves interest on £10 more each month, eventually £100.

Check any overpayment penalties though.

TalkinPeace Tue 04-Mar-14 19:37:04

It depends on the terms of your mortgage

many are limited to a max 10% overpayment in any year
others to max and min amounts
read your terms

also is the overpayment going into an "overpayment fund" where you can draw it back out if needed
or is it going straight off capital?

FWIW I prefere the former as then its effectively a tax free high interest savings account
keep the monthly payment as high as you can manage and pay the capital off as early as you can as then you make the max savings

have a look at my mortgages spreadsheet on the relevant thread to help you visualise

TwentyFourteen Wed 05-Mar-14 07:41:53

Thanks for the replies, the overpayment/s will be capital repayments and we will keep our monthly mortgage payments the same, when I did the money supermarket overpayment calculator the numbers looked the same whether we paid a lump sum or over 12 months which I can't understand?

maitaimojito Wed 05-Mar-14 07:48:54

Usually only one-off capital payments are used to reduce the balance for interest immediately.

Any monthly overpayments will sit on the account as a credit until the end of the year when your balance is recalculated.

It does allow you to make payments over and above though if your mortgage only allows, say 10%

TwentyFourteen Wed 05-Mar-14 09:45:58

Great thanks

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