'Don't shorten your mortgage term if you can overpay' blog discussion

A question about : 'Don't shorten your mortgage term if you can overpay' blog discussion

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's Don’t shorten your mortgage term if you can overpay Blog.

Please click 'post reply' to discuss below.

Best answers:

• That is interesting.
  When i overpay i get the option that the repayment goes to either reduce the term or reduce the monthly payment, which should i chose?
• Exactly what I try and explain to people. Very well said. Overpaying your mortgage is such a powerful and beneficial thing to do if you can. Even an extra Ј50 a month can save you years of paying a mortgage. Wish more people knew about it and understood it. Obviously the banks don't want you to do it as it loses them a hell of a lot of money..... Keep the term the same and overpay for maximum flexibility.
  Quote:
• My mortgage provide is nationwide and the default behaviour of an overpayment is to reduce the monthly payment, i will get it changed.
• Thanks for your explanation. Nationwide allow me a maximum overpayment of Ј500 per month and i am already at that limit each month and seeing as the " reducing monthly payment option " relies on me increasing my overpayment by the amount that my monthly payment reduces each month then it does seem like i will be better off reducing my term if i feel i could always afford my existing monthly payment.
  Thanks for clarifying that for me.
• In Womble's situation reducing the term is the best option because it is only reducing the term by say, 1 month each time they overpay alongside the fact they can only overpay their maximum of Ј500 per month. That is different to requesting a reduced term that matches the maximum monthly payment affordable as in Martin's blog, which would result in a permanently higher monthly payment.
  If Womble cannot afford an overpayment next month that is no problem as the remaining monthly payments over the incrementally reduced term are no bigger than previously.
• I switched my fixed rate to a flexi and use the difference (Ј110 per month currently) to overpay with. Win win
• I think what some of the examples here show is that the decision is not clear cut and every case is different depending on the specific terms of the mortgage.
  I agree with JimmyTheWig that if you have complete flexibility on your payments then you should choose to reduce the monthly payment and keep the term as is but then increase your overpayment to compensate. This option always gives you the ability to stop the overpayments and just pay the lower minimum payment if needs be.
• I have a question:
  I overpay monthly, and each year the bank automatically reduces my monthly payment to keep the term the same (I am not allowed to opt out of this). So I just increase my overpayment by the amount they have reduced.
  Overall am I saving money by overpaying if they keep lowering my payments?
  I think I am (which is why I keep overpaying) but am I?