Best way to overpay a mortgage

[tali1]

Which is best way to overpay a mortgage - lump sum or extra monthly payments?

[buildersmate]

Just do it as quickly as possible. The sooner the extra payments hit the account, the less interest one pays.
The only proviso is that one needs to check when the mortgage provider takes action on the overpayment - some reduce the outstanding balance on the day it is received, some on the same date in each month, and there may be a few who only take it into account once per year.

[annie0000]

Might be worth checking if you have a penalty applied to overpaying and whether that differs whether it is a one off or monthly payment. i.e. there may be a single charge each time you overpay, in which case it would be better to pay one big payment, or it may be that you can make payments under a certain amount penalty free, in which case you would need to weigh up the saving made on the charges versus the interest saved by paying earlier. As buildersmate says, in general, the earlier you pay it the more interest you save. If you have an annual overpayment allowance - check when the anniversary is and make sure that you get one payment in in each year.

[tali1]

Thanks , i am allowed a generous 10% overpayment of outstanding balance per anniversary.

[annie0000]

Cool - will they allow you to use last years anniversary as well as the one coming up since you haven't used it yet?

I have a flexible mortgage and I can do what i like really - the interest rate is higher, but it actually doesn't make that much difference when your mortgage gets lower. I overpay 200% of the monthly repayment every month - at the moment that is about 20% of the outstanding balance p.a. Should pay off the mortgage about 15 years early!

[humpy07]

I'm with Nationwide, and they allow me to pay an additional £500 PM without having to pay an early repayment charge.

[tali1]

Found out overpayment action starts just a day after :)

[CW1]

humpy07, I'm with Nationwide as well, and was paying the maximum extra £500 each month. Then I started getting letters saying the scheduled repayments were being reduced as I was overpaying by "£500 or over", which defeated the object really. Now I overpay by £499 instead.