If I chuck a lump sum at my mortgage...

[MindYours]

Will my monthly repayments automatically reduce? I'll still hopefully stick to the same amount or overpay anyway but it would be nice to know if I ever got stuck or lost my job etc I'm only expected to now pay say £380 per month and not £400...

Probably, but no one can tell you for certain. It would be best to check with your mortgagee.

Yeah I will on Monday I just wondered if it's a standard thing that's all. There are some pretty knowledgeable people on here lol

When we remortgaged we had to decided if we overpaid if we wanted the term reduced of the monthly repayment reduced. However we could contact them and change this choice at any point.

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Bloody hell you are lucky £400 mortgage - I pay £1450 rent 😂

You can usually do it one of two ways. Pay a lump sum and reduce the years you have left on your mortgage or keep that the same and your monthly payment will be reduced.
If you want to think long-term then reducing the years of mortgage is best as you will pay less interest in the long term and pay it off quicker.

MrsPear I know lol, I thankfully live nowhere near London!

I can't remember what happened when I paid a lump sum - I think they automatically recalculate - however I do remember being told that when the annual statement is produced they will recalculate payments in any case to maintain the 25 year end date (ie reduce the monthly payment). In order to prevent this I have a note on my account that my mortgage payment is to remain as I have set it until I tell them otherwise. I am currently overpaying every month. I suspect this is a policy that will vary from lender to lender and I also think they will err to keeping the duration of the mortgage as they will make more money in interest this way.

We had the choice of reducing the payments and keeping the term the same, or keeping the payments the same and reducing the term.

When we overpaid, we specified that we wanted to reduce the term and not the monthly payment.

They do recalculate it - I’ve just put a lump sum on ours and it’s reduced but I can’t increase it because I’ve made the maximum overpayment. Ours for example is 10% of the entire mortgage per year so if you pay that off you can’t then make monthly overpayments.

If you want to reduce the payments then make sure they take it off the actual capital so you do pay less interest. We had to ask Barclays as they didn’t do this automatically!

You'll need to let them know how you want it to be applied. If you are happy to keep paying the same amount each month then you could opt to reduce the monthly payments and then voluntarily overpay each month. You'll then have the option to go back to your lower actual repayments if you need a bit of spare cash each month.

However, it depends on how the rest of your finances are looking - if your pension isnt on track you might be better off putting the difference into it.

Also you might need to check how much you can overpay. Mine is limited to 10% a year

Yes I think given the fact that my monthly repayments are quite low anyway compared to what I was paying as a renter I would probably be better off shortening the total term as much as I can. It's a 35 year mortgage (I only bought the house last year) and I thought at the time there's no way I want to be paying a mortgage off for 35 years! I'm 36 this year...

Id only pay the mortgage off faster if my retirement and pension savings were maxed out.

I closed my pension payments last year (I know I know) along with gym membership and everything else I could think of as I was desperate to get every single penny for my house deposit. I keep meaning to reopen pension

So do you have any cash savings at all apart from this lump sum that you are planning to use to pay off your mortgage?

Palavah - yes I'm big on savings, the lump sum for my mortgage is roughly 25% of an inheritance. Rest is mainly going straight into savings account.

You need to sort your pension out. I'd be putting the lump sum into that tbh. Interest rates are so low.

Yes, I have done this over the last few years and kept my term the same. My monthly repayments have gone from £618 to £41 which makes a massive difference as I have periods of unemployment sometimes (contract work). I don't let my savings level go below a certain amount in case of unexpected expenses. You can get a pretty accurate monthly repayment using an online calculator as long as you know the interest rate.

We're with Santander, and like others we had the choice of reducing monthly payments or shortening the term.

Why not pay most of the inheritance into the mortgage or do you have to do reno?

Flirtygirl - I'm limited to what I can overpay each year, plus I like to have a lot of savings to fall back on for either luxuries, another house deposit if I ever upgrade or emergencies

You need to put lump sum into your pension savings to catch up. The mortgage is very low payment and lowest interest debt you will ever have.
But your retirement is the most expensive purchase you will ever have to buy. It costs far more than a house to fund the last 20-40yrs of your life and you cannot take out credit to pay for it like a house.