It's much simpler than that...

Most mortgages allow for overpayments without paying an early redemption penalty anyway; check your mortgage offer. Most mortgages will also have an early redemption penalty, but the period over which it extends depends on the deal you bought e.g. 3 year fixed rate, 2 year discounted rate etc.

With the exception of some fixed rate mortgages which maintain the same repayment throughout the fixed rate period even if you overpay, any overpayment will have an immediate impact on the capital remaining and the interest payable. Unless you can afford to overpay more than the amount allowed without incurring a penalty, or the lender doesn't allow overpayments at all, you'd be better off making the overpayments immediately i.e. on a monthly basis. The production of the annual statement means cock all, it's just a statement of how much you owe - it doesn't in itself trigger a recalculation of the monthly repayment.

Incidentally, this will apply to interest-only as well as repayment mortgages. Considering the 'usual' mortgage term is 25 years, I'd be surprised if anyone could knock decades off their mortgage term by chucking spare cash at their mortgage each month.

There are plenty of offset mortgage calculators online which you can use to estimate the number of years/months you can knock off your mortgage term by offsetting savings, salary or by making overpayments.

Mortgage companies don't give a shit if you repay early. They're still getting their interest and have received their fees.
(Tighthead, Wed 16 Nov 2011, 8:08, 1 reply)

Well, the way mine worked was that the monthly repayment figure was recalculated annually as I outlined (y.m.m.v.) and the savings account was used just to accrue some interest on the cash you were stashing.
Yes if you can overpay, and if it does take immediate effect, then that's probably better. However, you have to budget for regular overpayments; my way of doing it is a bit more flexible in that, if the excrement impacts the rotary air-moving device, you could use the 'spare' cash for some other purpose - rather than being committed to making overpayments.

Yea, 'decades' was a bit of an overstatement :-D (I think I only managed to knock just over ten years off mine).

Tell you what though: I was surprised at just how quickly my repayments went from "Shit - how much!" to "Shit - that's less than a round of drinks!!!"
(minimalist ..., Wed 16 Nov 2011, 11:24, closed)