Reduce monthly mortgage payment by making lump sum overpayment

franzilein

Hi,

just a quick question: If I made a lump sum overpayment of lets say €20,000, this would take couple of years off the mortgage. But instead of reducing the term, could I also opt for reducing the monthly payment instead?

Thanks

Mrs OBumble

It totally depends on the terms of your mortage.

And the best option depends on your plans for the future, ie having more cash now more important than being mortage-free earlier.

Ray Palmer

If you look into it you are probably better off just using the money to pay your normal mortgage payments. Interest rates are so low you don't get much benefit for it at the moment.

Lots of calculators out there to work it out, your own bank probably have one.

franzilein

Thanks. Yeah I saw those calculators, but they only tell you how many years you can take off, not whether you can reduce the monthly payments that way. It might not make sense, but the thinking behind this is that we're looking to let our house and it would be nice if the monthly payments could be brought down a little so the gap between payments and the rent we'd receive would be a little smaller.

Ray Palmer

Some of them do both

franzilein

Thanks, that's good to know, will check with the bank then.

Victor

I would make sure to keep some cash or short term savings.

There may be tax implications, depending on whether you get TRS.

Ray Palmer wrote: »

If you look into it you are probably better off just using the money to pay your normal mortgage payments. Interest rates are so low you don't get much benefit for it at the moment.

That works both ways - they might be getting very little on their savings. 41% DIRT from next year.

Moonbeam

It saves you more money in the long term to take hte money off the mortgage principal. 15k off a mortgage can save you over 30k in the life of a mortgage.