Making overpayments to HSBC mortgage

PrincessLou · 10 September 2012 at 1:18PM

We have just bought our first house and we have known since before we bought it we wanted to make overpayments each month to really build up our equity and pay the mortgage off as soon as possible.

With our HSBC mortgage we are able to pay up to 20% overpayment each month. However, because i am self-employed our income fluctuates from month to month so therefore so will the amount we will be able to overpay each month. My husband has spoken to HSBC about how to make overpayments and they have said that we will need to set up a direct debit. Will this mean that we will have to change the direct debit amount each month to what we want to pay in overpayment? Also, can we only make one overpayment each month if it comes out by direct debit? Does anyone have a HSBC mortgage and know how it works?

Before we bought our house i was always reading the mortgage forum boards on here and it sounded like people just sent payments as and when they chose to for differing amounts. It sounded so easy. HSBC seems very rigid in comparison.

Thanks in advance!

DVardysShadow · 10 September 2012 at 2:41PM

Keep track of your overpayment money in your bank account. If you have £300 available right now, set your overpayment at £100/month [1/3 of the amount available]. If your available amount drops to £225, drop your overpayment to £75/month. If it rises to £375, set it to £125/month. Be consistent and always work out the amount on mortgage day, or the first or the last day of the month. If you were employed, you could work it out on payday or the day before.

[Deleted User] · 10 September 2012 at 2:59PM

Yes unfortunately you can't pay in lumps sums whilst, for example, still within the discount period. If you do charges are incurred.

All you can do is budget for 'up to' 20% overpayments.

No online facility either.

A bit crap but made up for by great % rates and customer service.

pinkteapot · 10 September 2012 at 3:02PM

Just for anyone else reading - this only applies during periods where you're limited in your maximum overpayments (2/3/5 year fixed/discount rate etc).

Once on the SVR, or on their lifetime tracker mortgages, you can overpay whenever you like through online banking. We just go in and transfer money from our current account to our mortgage account.

jonas123 · 10 September 2012 at 3:04PM

I assume you've checked that you can't just make one-off payments? I don't have much experience with the 'fixed term' deals, but I'm on the lifetime tracker with HSBC and you can just make transfers straight into the mortgage account. It doesn't have any restrictions on it though regarding overpayments so that might be why.

exarmydreamer · 10 September 2012 at 3:11PM

Hi:j

We were on a 5 yr fixed rate, which ended in July. Since then I have made loads of overpayments, using the internet banking.

We were only allowed to overpay the 20% during the fixed rate, so arranged for that to be taken out at the beginning of the month with the regular payment.

Now having made large over payments during last month, I was surprised not to see a change in interest rate at the beginning of this month. So, I phoned up and was told that interest is calculated one month behind so should see beginning of October what difference my payments have made, in July!. Hope this helps.

diadeb · 19 September 2012 at 4:36PM

We are also on the lifetime tracker - great product, thanks HSBC, although all their savings products are pants......;)

I make occasional overpayments and always do this online - it's very easy, but of course there are no restrictions on this mortgage.

In your case OP, I would start putting aside any spare money you have into a savings account and then work out what you can afford to overpay from this, over a few months. You can adjust overpayments as you go as DVardysShadow suggested.

However, I have absolutely no understanding of how the interest gets adjusted! Regardless of what overpayments I have made, the monthly interest payment going out remains the same, which is fine, as I don't want to reduce this. I cannot see how the interest charged is worked out though, as it varies so much from one month to the next. I can understand the odd variance, for example in the shorter months? However in the last few months the amount of interest has varied between a saving of £4.49 up to £34.21 a month, going up and down every month, despite steady overpayments and with the mortgage gradually going down (in very small increments!). Anyone shed any light on this?

kingstreet · 19 September 2012 at 5:16PM

PrincessLou wrote: »

they have said that we will need to set up a direct debit. Will this mean that we will have to change the direct debit amount each month to what we want to pay in overpayment

Are you sure it's direct debit and not standing order?

A DD is simply your instruction to allow the bank to take amounts of its choice on unspecified dates. I don't understand why another DD would be required if you already pay your mortgage that way.

A SO is your instruction to your bank to pay set amounts on set dates and can be varied by you at any time. If you use internet banking, you could change the amount each month if you choose to.

varghesejim · 19 September 2012 at 5:43PM

Am I correct in assuming that any over payments done on HSBC tracker mortgages goes toward to the principal amount ONLY?

LEP · 19 September 2012 at 5:59PM

If you want to change the amount you overpay each month you need to give them at least 5 working days notice before the DD date....or at least that's what they told me when I arranged to set up overpayments last month.

jimmy125 · 21 September 2012 at 4:08PM

You can alter the amount that HSBC take through the direct debit by using the "my messages" feature on internet banking. Simply send an instruction and you will receive confirmation in around 2 days. They will then take this new amount until you inform them otherwise.

There is a way to effectively circumvent the 20% cap on HSBC fixed rates which is to reduce the mortgage term however, once you have done this there is no going back and if you want to re-extend the term it requires a new mortgage application.

Making overpayments to HSBC mortgage

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