Making overpayments on our tracker mortgage

Hi all

Decided to make extra payments into our mortgage from September onwards. Wrote into the bank and set it up. It's starting soon. They wrote back saying

"If you regularly overpay your mortgage, we credit your account immediately and the overpayment will reduce the balance, but not the term, of your mortgage. It will also have the effect of adjusting your interest".

Two questions:

1) I read on another thread on here that I should have specifically said for them to take the money off our capital - but from the above wording that's what they're saying they'll do, am I right?

2) When they say it wont' reduce the term of our mortgage, surely if we pay it off earlier that reduces the term? Can someone explain this?

thanks

M

If you overpay your mortgage, the balance will reduce.

If you overpay your mortgage, you will pay it off earlier than you would otherwise have paid it off.

"the overpayment ... will not reduce the term" probably means the following:
You owe €100,000 and you have 10 years left on your mortgage, so the repayment is €1,060.
You decide to pay €2,000 a month instead.
At the end of year 1, you will owe about €80,000 and so with 9 years left to go, the repayment due will reduce to €921.

So they left the term as it was, and reduced the repayment due.

If you continue to overpay your mortgage, it will be paid off early.

If, after a year, you are under financial pressure, your repayment will drop to €921.

Brendan, thanks so much, that clarifies things.

M