Mortgage overpayments

[Sammysees]

I am hoping someone can help me out re overpaying on my mortgage. I took out a £100k mortgage in March 2020. Fixed rate for 5 years at 2.3%.

I can overpay 10% each year ie. £10k. The answer I can’t seem to find is it £10k per year from March to February each year or January to December?

I would like to pay £10k this year and ideally another £10k next year before my current fix ends. But if I pay £10k in December and then £10k in February next year will it be deemed that I have paid £20k in one year? That obviously would come with its own problems and I could end up paying more if I’m then penalised.

Does anyone know the answer to this? Thank you!

It doesn’t make sense to overpay when you cold get nearly 5% interest on it in savings. Wait until renewal and then pay off the whole lot plus interest as a lump sum 😁

have a look on your banks website. Mine last it out very clearly and I imagine most others will too. Or try the 'chat bot' Or ring them tomorrow.

Depends on your lender. Generally it's the 10% of balance on 1st January - 31st December

Your payment window is March to February as it is from the date of drawdown and not calendar year.

I would ring your mortgage provider ahead of making the payment so you have their confirmation that is the case.

Check with your lender. But do consider you can make far more in interest in a savings account.

Check with your lender!
Also - I may be wrong but I thought you could only over pay % of your outstanding balance, not of the starting debt amount.

I have been leaving it in my savings account and paying a lump sum off in December each year. I think I will have to ring my lender tomorrow. Their website doesn’t state anything but I do get a mortgage statement in January each year not March so I’m inclined to think it is January to December.

Mine says 10% of the start amount. Which is why I want to pay off as much as I can before renewal. When I renew I will only be able to pay £4k a year extra as I’m hoping to get it down to £40k.

@Sammysees you might as well wait as long as you can for the second payment though so you’re earning the interest on the savings?

It should be in your terms and conditions somewhere so you'll need to read through these which you'll have signed when you took it out. Should be a copy on their website.

Thank you everyone. I think I will just ring them tomorrow.

@Sammysees you can pay off as much as you like (in the nano seconds ) between deals. Obviously let them know that's what you want to do.

But the amount you’re saving will be a lot less than the amount of mortgage debt you’re paying interest on so it’s not always better to save.

No @Hollyhead is right, it is a straight comparison. You can save £10,000 at interest of say 5% call it 4% after tax, or you can pay off £10,000 and save interest at 2.3%.

If you can get a higher rate of interest on the £10k in savings than you would save on the £10k, you are better off saving and then paying a lump sum when you remortgage.

Mine is done by the mortgage renewal month date, but I tend to make the payment after I've done my tax return towards the end of the tax year.

You can save £10,000 at interest of say 5% call it 4% after tax

Basic rate tax payers can earn £1000 interest before they pay any tax

Why? Just leave the money in savings.

You're literally throwing away your good fortune of fixing at a low rate by overpaying. Until the fix is close to the end, don't overpay a penny.

Not everybody wants to keep them money in savings. Yes you can get a bit more in interest but not everybody wants that.

My mortgage is tiny, just 13k left at 2.7% . Yes I could save and get 5% but I get much MUCH more peace of mind from seeing my balance reducing quickly and my term shortening. Current payments are £246 a month and I try to overpay by £150-200 a month. By doing this my mortgage has already shortened by 3 years and I'm hoping to be done in less than 3 years. If I had paid that contractual payments it wouldn't be done until 2028

My mortgage was date you got the mortgage til that date the following year, not calendar year. And the amount you could overpay always went by the original loan amount. Not the amount when you did a new fix...

We overpay 10% of the outstanding balance each year. A couple of years ago we were able to make more than one payment without penalty because we came to the end of our fix. Our mortgage year was July to July. So, we paid 10% in that period, we got a new fix and adjusted the mortgage year to calendar year on advice of our lender, made a second overpayment of 10% in September and a third in the January. No penalty and made a massive difference to the balance and a big saving on compound interest.
Yes, we could have invested that money for a higher rate of return than the mortgage interest rate but repaying our mortgage is our financial priority. Everyone has their own priorities.

Mines 10% of the original loan - not sure about the time period, I have wondered the same but never got round to phoning them as I've not hit £21k in overpayments in 1 year yet lol