If you overpay your mortgage does that mean you can take a break from paying later on?

[Willtheymakemegoonthemeds]

Not sure if I'm just being dim but if I overpay my mortgage does that mean if later on down the line I lose my job or something will I be able to not pay the mortgage because its already been paid? or is it a once its gone its gone deal?

Maybe, depends on your T&Cs. Ask your bank x

It very much depends on the terms of the individual mortgage.

All mortgages are different. We overpay every month and it sits in a separate pot. It still offsets but it’s there if we ever need to take a large chunk of money.

Doesn’t work like that with mine

I overpay
With one intention

To finish it ASAP so I reduce my Interest on it by many many thousands

Not necessarily. They are two separate issues and it depends on your mortgage policy whether the overpayments go into a fund which you can "borrow" later or simply reduce the outstanding balance.

You need to check with your mortgage provider about the terms of overpayment and the option of breaks.

I tried this with HSBC when I lost my job. Got an unequivocal No!

Thankfully I found another job in time, but I've now saved up an amount now as a safety net, so it can't happen again.

As others say, it depends on your bank T&Cs. In general banks don't want you to default for any reason, so if you have valid reasons to need an adjustment they will discuss options when you call them to discuss what's needed (extended term, brief payment holiday etc). Obviously there are limits where that gets more difficult; if you're late with lots of payments, already took a few payment breaks, over 65 etc.

Most providers allow you to overpay and then underpay should you want to. However it's not a payment holiday etc its just using that pot of funds you've built up to then cover the monthly payments for a while til the pot has run out. HOWEVER if you call them and say you're in financial difficulty and therefore wish to underpay I.e you've lost your job, this won't apply and the normal payment difficulties process would apply.

Sorry, should add if you have lots of other debts then that might limit options too.

Not with my mortgage, you would still be expected to pay your monthly payment despite overpaying in the past.

With mine (when I had one), the overpayment was immediately applied to the principle. This was good, as it reduced the remaining term and the total cost of interest. The standard/normal payment remained the same.

If in doubt, stash away the overpayment amount until you have a few months full payment in hand, then start the overpayment.

With mine, overpayments reduced the term of the loan. Not the monthly amount and did not get the right to Miss payments.

I could have chosen to have the overpayment reduce the monthly payment but leave the term the same.

If you may need the money for a job loss, you might be better keeping it, or some of it.

Usually not.

It will depend on your lender but for my lender the clawback of any overpayments could only happen directly for those overpayments made within the current fixed-deal period. So I last rearranged my mortgage about 10 months ago and have been overpaying by £100 per month, so I can take a payment holiday without permission for £1000 worth of repayments. Which isn't a lot but would tide me over for a short while if I suddenly lost my job.

However most lenders are open to either accepting a payment holiday for a set period or at least switching a repayment mortgage to an interest-only mortgage temporarily. They would want evidence that there would be a definite end to the financial difficulties but you wouldn't be put into a repossession process for being in arrears a bit.

What overpayments definitely can do is drastically reduce the expected monthly repayment each time you renew your deal. If you overpay right from the start, and rearrange a new fixed deal every 2 or 3 years, then by 15 years into a 25 year repayment deal the expected repayment amount becomes a lot more affordable, and so long as you keep overpaying you can be reasonably sure that in the event of financial trouble it won't be too difficult to keep servicing the debt until you are back on an even keel.

No, you'd need a flexible mortgage to be able to draw down at a later date. There may also be an overpayment rule in place per year before incurring fees. So check your mortgage offer or contact your Love your lender.

Most lenders would consider payment deferrals or an arrangement based on your circumstances at the time if you needed to underpay for a period - just be aware any time you don't make your monthly instalment on time & in full it can impact your credit rating.

Usually it doesn't mean that OP
Overpaying means you pay off mortgage quicker with less interest (as long as you stick to below maximum overpayments allowed for that period)
Unless you have a flexible mortgage agreement that already stated this- they won't let you miss any payments by virtue of having overpaid earlier that year. As that was to your benefit not theirs (they like the accrued interest)

Given the responses above, you might want to change your plans if continued employment is risky - instead of overpaying the mortgage, place that additional amount into a savings account instead; then you can withdraw from those savings to pay the mortgage if you are not working for a period.

Mine gives the option of an underpayment using any overpayments. The small print says you have to apply for it so don’t know how readily the bank says yes.

Check with your lender

Also, be aware that some mortgages have penalties if you overpay too much

Depends, for us we made clear that we wanted overpayments to shorten the term so whenever we overpay they send us a new thing to sign confirming the new end date. But you can also use overpayments to reduce the regular payments and keep the term the same, and using it to have a mortgage holiday seems like the same principle as that. I'd talk to your lender.

@notanothertakeaway

Check with your lender

Also, be aware that some mortgages have penalties if you overpay too much

Although you can sometimes get round that by shortening the term of the loan, which inevitably means the monthly payment goes up. That can be a smart move, but only if you know you can overpay for the foreseeable future

@JenniferAllisonPhillipaSue

Given the responses above, you might want to change your plans if continued employment is risky - instead of overpaying the mortgage, place that additional amount into a savings account instead; then you can withdraw from those savings to pay the mortgage if you are not working for a period.

This is what l would do too

I can't on mine, but since we've got a low fixed rate at the moment I'm putting anything I'd overpay into a stocks and shares ISA, with the intention of using that to pay off the mortgage as and when it's most appropriate. If I need the money for any other reason then I can still use it.