Avant Overpayment - reduce the term or the monthly payment?

[AndyDublin]

Hi

I contacted Avant earlier today about making an overpayment, they emailed me the details and I made a payment to their account.

On the email it asked me to;
Please also indicate, by return email, how you wish for your account to be treated after the lump sum is applied to your account, i.e., do you wish for the repayments or term to be adjusted?

I had assumed I would just end up clearing the mortage early, but leave the payment and term the same. If i need to choose one I'm wondering which is best;

Reduce payment - Next year I would increase my overpayment
Reduce term - Current it's 20 years but I hope to have it paid in 10

I like idea of longer term should something happen I can lower my monthly payments.
Any advice appreciated.

Term - 20 years
Rate - 2.05% fixed 7 years
Balance - 217K less 10k overpayment to be applied

Thanks

 

[Brendan Burgess]

Key Post - "Overpaying my mortgage - should I reduce the term or the monthly repayment?"

This question comes up in a variety of ways and the threads often go off topic with irrelevant calculations. The interest charged each year is exactly the same - we will return to this. Reducing the repayment is simply reducing the payment you are contractually obliged to make under your...

www.askaboutmoney.com

 

[Paul F]

I contacted Avant earlier today about making an overpayment, they emailed me the details and I made a payment to their account.

@AndyDublin Overpaying your mortgage/reducing your balance may not be the best use of your money. Your priorities should usually be:

• Paying off expensive debt (credit cards, personal loans, car loans, etc.)
• Building up an emergency fund in a savings/current account (3 to 6 months' living expenses)
• Saving money for any expenses you will have over the next few years (kids; childcare; adult children going to college, etc.)
• Maxing out your pension contributions (very large tax relief is given)
• Overpaying your mortgage

in approximately that order. Consider posting a thread about your situation in the Money Makeover forum.

 

[AndyDublin]

Thanks @Brendan Burgess I didn't see that post.

@Paul F I don't have any other debt, have an emergecy fund and will max out my pension contribution for last year and this year. I have savings built up and with inflation would rather have them put to use.

I will go with reducing the payment to leave myself more flexiblity, thanks.