Overpaying mortgage

[Livvyliv18]

If you overpay your mortgage every month how do you do it and how much do you over pay ?
Ive increased my DD by £100 and then I add the odd £50 when I have spare cash.I also round up my bank account every night.It works out Im probably overpaying about £250 pm.
Would it be better to pay larger amounts at a time or is it ok to trickle money in?
The balance never seems to go down!
My mortgage company allows up to 10%.
Ive looked at the overpayment calculators so I know it’s worth doing but I’m just unsure if I’m doing it the best way
TIA

I think you have to make sure it's coming off the capital, rather than the interest.

Google Martin Lewis MSE mortgage overpayment to make sure.

Why does it matter where it gets taken from? Your interest just gets added to what you owe anyway.

Mine has 2 options - it will either reduce the capital/term or it will reduce the future payments. I've got mine set to reduce the capital.

With mine interest is calculated daily (added to balance monthly) so its worth paying extra as soon as you have it.

I left my direct debit as the normal mortgage amount, but set up a separate standing order to transfer the overpayment, so if I need to cancel or amend that I won't risk buggering up the actual mortgage payment!

Our payment is £670 and we pay £1000. We’ve been doing that for a couple of years. Our broker calculated that we will save £20k in interest and pay off around 5 years early. We can overpay 10% of the outstanding balance every year so we’re going to start making a top up payment annually in addition to the monthly payments to take the overpayment to the max each year.

This
I reduce the capital .

When we first took out our mortgage we sent the DD to £500 even though it should have been around £270. Five years later it’s still £500 - I don’t actually know what we should be paying anymore.

I actually need to check to make sure we aren’t overpaying too much now and might be hit with a fee.

If your capital sum gets smaller, you owe less interest.

Only £10. But I still got to that halfway point months faster than the original schedule. It all adds up.

My mortgage has the same 2 options. We've been throwing money at it in recent years from overtime and so far it has taken 7 years off the length. I can't wait to be mortgage free!

@Felixthefish how did you work out how much it’s taken off the length?

The most effective is to pay the 10% lump sum at the start of the overpayment term as this reduces the balance straight away and therefore reduces the interest paid during that year.
I've done ad hoc overpaying per month, fixed monthly overpayment and when we could afford it, the 10% overpayment. We're not overpaying on our current mortgage as our savings are at a higher rate than our mortgage so we're saving to pay a lump sum at the end of our fixed term.

There are overpayment calculators online if your own bank doesn't tell you - means you can figure with the numbers and see how much difference it actually makes. Obviously it can't take into account future interest rates etc but it's nice to get an idea.

I've got a small/long mortgage so at the moment my payments are taking me from 23 years to 12

I overpay between £50 and £150 a month (initially borrowed £81k over 30 years). After 7 years I was able to reduce the term by 5 years and keep the required monthly DD the same. I'm still overpaying the same amount and hope to knock at least 10 years off the full term.

I've also got one of those save the change features on my bank account that rounds all my transactions up to the nearest £. At the end of the month I transfer that to the mortgage too (assuming I'm not overdrawn).

Even small regular overpayments will make a big difference to the term.

But you don’t have a capital balance and an interest balance. It’s one amount.

if you owe £200k and pay £1k regular payment and then £100 overpayment, you’ve paid £1100 off. Next month’s balance is (£200k - £1100) + interest of

If you are going to carry on overpaying it doesn't make a huge amount of difference which option you choose. With either option, the balance you owe will be lower so the next time interest is calculated it will be less, and it's not different interest calculation either way. The difference only comes next time the bank recalculates what your normal payment should be. Either the new repayments is the same as it would have been without the overpayments but any overpayments (and their consequential reduction in interest added) are effectively used to prepay the final payment due, thus gradually bringing the date of being mortgage-free ever closer, or the duration of the agreement stays the same but the standard payment due gets gradually less.

We've been overpaying for ages and our official repayments amount is now down to £450pm ish but we are paying £700pm. This is insulating us from the cost of living crisis a bit because I could boost our budget by £200pm just by reducing our mortgage payment to £500pm

Interest is calculated daily so you get the benefit of any overpayment straight away, assuming that the interest rate on your mortgage is higher than what you get on savings, which isn't necessarily the case if you took out one of the very cheap fixes available a few months or so ago.

In that situation, you'd likely earn more interest than the overpayment saves you by putting the money into a regular savings account that pays a higher rate.

Would it be better to invest extra money rather than pay extra mortgage? I'm never sure.

This might help

ukpersonal.finance/mortgage-overpayments-vs-investments/

You need to read the terms and conditions of your mortgage carefully. See if you need to specify that the over-payments are to reduce the capital.

We have a cheap fix for a few more years so the money has been invested instead. If interest rates are high we might look at paying off the whole lot once this fix ends but who knows what will happen.

We took out a mortgage when interest rates started falling.
We kept the payment at the original 4-ish% payment, even when rates dropped to close to 0.
Unfortunately that's not the way the markets are going right no, so probably not much help.
We saved 1000s and 1000s tho.

My remaining Mortgage is £28300 and every year I pay 10% on top of my Mortgage payments. I use to pay the 10% as a lump sum but now just pay 10% on top of my Monthly Mortgage payments. My Mortgage is £143 and I pay £235 on top so £378 altogether. I sometimes make bigger payments ( more than 10%) when my fixed mortgage ends and just before I start the new fixed rate.

Mine used to be £765 per month. For last 8 years we have paid £1k a month. Last statement I had said I had to pay £545 per month. If I continue to pay £1k per month then I have 19 months left to pay. It will be a relief to get it paid.

We overpaid what we could every month, then added in lumps when we could.

It took 11 years off our mortgage and we paid it off in full last month (after 40 years of having various mortgages). It's well worth doing if you can.

That said we have (younger!) friends who don't care about paying it off, saying they will enjoy the bigger expensive house now whilst they have small kids and then downsize and pay off the big mortgage when they are older.

So depends on how you see it I suppose.