Just made 10% overpayment on the mortgage - do I want the interest recalculated?

[BonApp]

I believe I need to request that the interest is recalculated, but I'm unclear on what difference it makes if I do?

If it reduces the monthly payments, then I guess I'm interested as it will mean we can overpay a bit more between now and end of April when we change mortgage providers.

Or if we don't, I would assume that the interest would be reconciled at that point when we ask for the settlement figure to change to a different company?

Basically, does it help financially to get the interest recalculated?

I would.

If you have a budget of say £800 per month to pay to your mortgage and £300 of that payment is interest then if it's recalculated only £250 may be interest and you'd be paying an extra £50 off the mortgage balance. You also wouldn't be accruing interest on that £50 each month so more would go off the balance.

Those figures were off the top of my head and I'm not great at explaining things but hopefully it made sense

Makes perfect sense thank you! I’ll call them today!

I would ask this question of the provider.

And read the t & c which will probably ime have a section on early repayments.

All ok, all within the max over/early repayment terms.

There's no such thing as "getting the interest recalculated". The interest is ALWAYS automatically recalculated. If you owe £X, and have an interest rate of Y%, they will automatically charge you Y% of £X in interest - it would be illegal for them to do anything else!

What you're getting this mixed up with, is getting the payments recalculated. Let me try to explain.

When you take out a mortgage, the interest rate and the term are used to determine your monthly payment. The monthly payment is calculated so that paying that amount every month, over that exact term, will precisely pay off the mortgage, both interest and capital, even though the amount of interest you pay changes every time you pay off some capital.

If you deviate from this plan by overpaying, it throws off all the calculations. Now, if you keep up the same monthly payment, you'll end up paying off the mortgage before the term ends.

Mortgage companies therefore handle overpayments in one of two ways. Either they let this happen, and reduce the term of the mortgage every time you make an overpayment, so you keep paying the same amount but pay it off faster. Or they recalculate your monthly payment every time you make an overpayment, so that you pay less every month but wind up repaying over the same amount of time as originally planned.

Although your mortgage company will default to one or the other of these options, they should let you choose the other one if you call and ask.