Making overpayments but the balance aint going down

A question about : Making overpayments but the balance aint going down

Dear forum members

Like anumber of other people on here, I too am desperate to pay my mortgage off. However I have noticed that my overpayments don't seem to be brining the mortgage balance down by the corresponding amount each month (so you help in understanding this is much appreciated).

Keeping it simple, my monthly mortgage payment is Ј400 which I pay, however I also overpay Ј1,100

I cant seem to work out why my mortgage balance is going down by Ј1,475 (and not by the full Ј1,500)

Surely if im required to pay Ј400 each month, then the extra Ј1,100 should be having its full effect

I did think that its due to the interest rate (which is 2.49%), being charged by the mortgage company on a daily basis. However the fact the regular mortgage payment is set at Ј400 by them would already take into account the interest rate.

I have 15 years left of paying Ј400 each month and so thought that making overpayments of Ј1,100 would mean Ј1,100 physically coming off the monthly balance

your ehlp in understanding this is much appreciated.

Best answers:

• My statement shows the amount of interest that gets charged every month. I expect yours will do the same.
• I think some mortgages are set up so that you pay all the interest off before the capital (I could be totally wrong, someone will no doubt correct me if I am). I think I may have this type of mortgage, which means you pay a LOT of interest over many years before you start chipping away with capital payments.
• If you are on a repayment mortgage then part of the monthly payment is interest and part is capital.
  The longer you pay for, the greater the proportion is capital and the smaller the proportion is interest.
  Even in the last of your fifteen years, you will pay some interest out of your payment, but it won't be very much.