Overpayment

Overpayment. You make an overpayment when you pay more each month to your mortgage lender than the stipulated required monthly repayment. Do this on a regular basis and your mortgage will be repaid ahead of schedule, before the end of the mortgage term. You will also have saved yourself a substantial sum of money in interest charges.

In order to get the most out of overpayments you need a mortgage offering a daily interest calculation. This means that every payment you make will affect the amount of interest charged to your account.

Making an overpayment will reduce the balance on which interest is charged. If, on the other hand, you make an underpayment or miss a payment, this will increase the balance on which interest is charged.

A variety of flexible mortgage deals are available allowing a mix of overpayment and underpayment options that may include a drawdown facility of the amount you have overpaid.

Last Updated: February 2008 © Moneyextra.com

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