I am aware the exact answers to my questions below may depend on the conditions of the mortgage but I would still be grateful for some advice and pointers.
Let's say I took a 2-year fixed rate mortgage for £100k. At the end of the initial 2-yr period, I have paid £20k towards the mortgage. £5k of this went to interest, and £15k towards the principal amount. So at the end of my 2-year period, I stand with a debt of 100k-15k = £85k, and in a position to be able to remortgage.
Let's also assume that in the initial 2-yr period I have accumulated £10k in the bank, which I could have used to gradually overpay the mortgage without an overpayment penalty. My questions are:
If I am remortgaging, can I use my £10k savings to reduce the mortgage amount to 85k-10k=£75k (directly deducting from the principal amount) before taking a mortgage with another provider?
If the answer to the first question is 'Yes', I believe this is definitely preferable to having overpaid, since through overpayments a massive chunk of my £10k would have gone to pay off interest rather than the principal amount. In contrast, by paying off £10k directly on the principal amount before remortgaging, I ensure that all the money is used to reduce the principal amount.
I hope the question is clear, basically if I have extra money and I want to minimise paying off interest, and can remortgage, what would be the most sensible course of action?