Mortgage Overpayment Question

nic283

Hi guys, I phoned up my mortgage lender to ask for details on how to make overpayments. I was told that the type of mortgage I have would incur a penalty for any type of overpayment I make. The key facts of my mortgage are below:

10. What happens if you do not want this mortgage any more?
Early Repayment Charges.
An early repayment charge applies if you want to repay the mortgage early. The charge is calculated using a loan amount of £113,099.00 and is based on 4% of the outstanding loan if the mortgage is repaid before 31/03/2011.
In addition, a Mortgage Exit Administration Fee of £199.00 is also payable.
Based on the original amount borrowed, a cash example of the early repayment charge that could apply would be £4,722.96 if repaid before 31/03/2011.
Therefore the maximum charge you could pay would be £4,523.96 plus fees which are currently £199.00.

11. What happens if you want to make overpayments?
If early repayment charges apply to lump sum payments it will be on the basis shown in Section 10 of this illustration. £500 is the minimum amount required and the amount you owe and the interest you pay will be reduced immediately. If you wish to make lump sum payment please make us aware of this at the time. If you make overpayments, then the amount you owe on your mortgage will be reduced immediately. However the amount of interest you pay will not reduce until the end of the mortgage year, which is 31 March.

Does this sound right that I cannot make any additional payments at all without being hit by a penalty?

Thanks for any help!

Rabiddog_2

If early repayment charges apply to lump sum payments

You need to post the type of mortgage and who its with....

nic283

It's a repayment mortgage with Dunfermline BS.

Toughluck

Just reading that above sounds like if ou overpay by the minimum of £500, you will incur a redemption charge of 4%, so a minimum of £20 would be taken off the £500. Just to kick you in the knackers even further, the amount you overpay, net, will only reduce the interest to be paid once a year (31/3/200?).

Seems harsh. You only have until March 2011 with them!!! I am struggling to find any benefits for you being with this lender nic? I hope you are on a 2% fixed rate lol.

nic283

I've now had a chance to check my mortgage offer and read the overpayments section:

Lump Sum Payments
You can make a one off annual lump sum payment of up to 10% of the original loan amount w/out incurring an ERC during the term of the product. This must be for a minimum amount of £500 over and above the monthly mortgage payment and can only be made during the month of Jan. If you repay more than 10% ERC will apply to the excess amount.

Overpayments
If you make OPs then the amount on your mortgage will be reduced immediately. However the amount of interest you will pay will not reduce until the end of the mortgage year, which is 31 Mar.

So... going by this the woman on the phone was talking crap and I can indeed make OPs without penalty (up to 10%). But, I should make a lump sum payment in Jan as any other OPs will not reduce any interest owed. This sound correct?