Best way to manage Mortgage overpayment

[Smoothieyummy]

Our mortgage allow to do 10% overpayment a year with no penalty.

How is it to best manage the overpayment? Should we over pay as long as we have the money or should we wait for a lump sum at the end of the year and pay in to the mortgage? Does it actually make a difference?

So for eg the option is to overpay 500 per month or to overpay at 6,000 per year.

Please give some advice.

You could ask your mortgage company for a quote for each option but I would have thought paying £500 month would be best as it immediately reduces the interest

In the current climate, paying monthly makes more sense. Reduce capital as early as possible - unless you have an amazing savings rate that makes waiting more advantageous. That's very unlikely, though. There are some great mortgage calculators out there which spell out the effects of any overpayments. I use this one: m.drcalculator.com/mortgage/

There are some excellent mortgage forums on www.moneysavingexpert.com. The folks over there will have all the answers for you.

Check whether your mortgage calculates the reduction of the balance from overpayments daily, monthly or annually. If yours is one where they only do it annually, you're better off putting the overpayment money in something that will pay you interest then doing it annually. Whereas if it will have an impact as soon as you overpay, may as well do it as often as possible- assuming you have already checked you wouldn't be better off putting the money in savings anyway.