What's the best option re overpaying mortgage?

[oneofthosedays]

Current mortgage just over £21k with 17yrs left. Interest rate is SVR of 3.99%, so monthly payments currently £145, no early repayment charges. Recently decided to start overpaying by £50 pm and mortgage provider said we can do one of 2 things - request regular recalculations of the mortgage so term remains the same but monthly payments go down or leave the account in credit which will go towards the balance and effectively reduce the term of the mortgage, also having the added benefit that if we ever needed to we could miss some payments.

If you've overpaid which did you choose? Is there one way that works out cheaper than the other? We are leaning toward the latter option because I would rather get it paid off quicker if we can. Any advice would be appreciated, we've never overpaid the mortgage before so am unsure of any potential pitfalls.

Make the term shorter.

Saves you interest - and means you are mortgage-free sooner!

I made a one off payment of £7 off our mortgage and used it to reduce the term by 2 years. We also increased our monthly payments by pence (about 20p IIRC), and made a total saving of about £22k across the life of the mortgage. Personally, I'd go with reducing term but I'm no expert so hopefully someone with more knowledge will come along soon

Reduce the term, without a doubt.

Definitely reduce the term - it makes it a lot cheaper as well as being debt-free sooner.

We are planning to do this with our mortgage once DS3 is finally at school and no more nursery fees.

Thanks for the advice, my instinct was to reduce the term and get rid as soon as poss, good to know you all agree!

I've also been reducing the term. My mortgage provider allows me to pay 10% of the balance each year without penalty. When I started doing it in 2009 the mortgage end date was 2020. Now it's 2017 and getting nearer. Saved a stack of interest.

mse calculator is useful

Definitely reduce the term. It will save you almost £3k in interest and reduce the term by almost six years.

I have previously looked at that mse overpayment calculator, thanks - i've tried it again today and it's just not working at all for me, just keeps resetting itself! Anyone else having trouble?

reduce the term as thats how you pay less interest over all

dh and i overpaid every month and knocked off 7years off a 25year mortgage and saved think £29k in interest

some will only let you pay off 10% per month/year - others allow £500 a month - also check when interest is calculated as if yearly then better to pay a lump sum off each year rather then monthly iyswim

Reduce the term.

Thank you - interest calculated daily and no restrictions on overpayments so we're good to go, just wish we could overpay more than £50 but it's a start and better than nothing!