Where to overpay?

pieman_71

Hi

First post on here and looking for some advice. Thanks to a divorce earlier in the year I now find myself with a £300K mortgage and a hefty 25 years to pay it off. Luckily the lovely people at HSBC have accepted me for the 0.74 above BOE tracker which is for life of mortgage and I can make unlimited overpayments.

So, thanks to the last rate cut I have a bit left in the budget which I want to continue paying into the mortgage to reduce the term in the long run. But it's not that simple . . . it's a split repayment / interest only mortgage so my question is do I:

a) Pay the additional money into the repayment part
b) Pay the additional money into the interest only part
c) Pay the additional money into the ISA (to pay off the interest only part)

thanks in advance

Jonbvn

pieman_71 wrote: »

Hi

First post on here and looking for some advice. Thanks to a divorce earlier in the year I now find myself with a £300K mortgage and a hefty 25 years to pay it off. Luckily the lovely people at HSBC have accepted me for the 0.74 above BOE tracker which is for life of mortgage and I can make unlimited overpayments.

So, thanks to the last rate cut I have a bit left in the budget which I want to continue paying into the mortgage to reduce the term in the long run. But it's not that simple . . . it's a split repayment / interest only mortgage so my question is do I:

a) Pay the additional money into the repayment part
b) Pay the additional money into the interest only part
c) Pay the additional money into the ISA (to pay off the interest only part)

thanks in advance

Hi,

Assuming the IO & repayment parts are at the same interest rate it doesn't really matter which part you overpay.

With a mtg IR of 5.24%, you should be able to find a cash ISA which pays more. Therefore, I would pay additional £3.6k into a good cash ISA.

Welshlassie

Pay into an ISA assuming you can find one above your rate (should be easy enough). Then when you have reached £3,600 I'd over pay into a regular saver or if you can't get one above your rate then I'd pay it off the IO part as at least your capital will be reducing and so you will be paying less interest on that part.

pieman_71

thanks both, my initial thought was to hit the repayment to start seeing a reduction in term so this gives a different perspective

Jonbvn

pieman_71 wrote: »

thanks both, my initial thought was to hit the repayment to start seeing a reduction in term so this gives a different perspective

When you overpay with HSBC (in my case anyway) they don't reduce the term, they reduce the minimum monthly payment amount. TBH, it really doesn't matter whether you reduce the monthly payment or the term, provided you reduce the amount of capital owed to the bank.

dimbo61

fill a cash ISA paying over 6 % first then overpay on the mortgage IO part and pray for another cut in the BOE base rate.
Save into an ISA every year as your emergency fund building up 6/9 months of income
GOOD LUCK on clearing £300k and saving for retirement !!

pieman_71

Thanks all.

It appears I was premature as the post as I'm now in wranglings with HSBC over the terms I applied for. The valuation has come back low (not really a surprise in the current climate) and puts me at 88% LTV. The product I applied for had a 90% max LTV but they're now saying the 90% is only valid on Repayment only mortgages and as mine has an IO portion it's treated as full IO which has a max LTV of 80%. All news to me and they still advertise it as 90%.

What they're saying is I can switch to total repayment but they won't honour the initial rate AND I'll have to pay the application fee for the new option. Either that or they'll lend me up to 80% on the IO part which leaves me short.

Very angry about the amount of time wasted with this and the fact they're changing the rules. Have asked for the call recordings to be pulled as we discussed the value and the LTV but I guess if they don't want to lend me the money they won't. Anyone got any other suggestions as to how to proceed?

thanks

bumpybecky

oh no! can you pay all as repayment over a longer term? not sure if this would be possible for you?

extending the term might look scary on paper, but if you're going to overpay anyay

pieman_71

Hi

Yes, whilst not ideal I can swap to complete overpayment based on the original deal of 0.74 above base. They're refusing to honour that though and saying I have to go for the current rate which is 1.98 above base + another fee of £599 (I've already paid £499 for the first deal).

:mad:

dimbo61

BOE rate cut to 3 % today no wonder they dont want to give you that deal.
If you can get the deal on repayment then go for it
Only hope its not too late
Forget the ISA,s as rates will now drop just see if you can get that tracker at BOE + 0.74 on repayment.
GOOD LUCK

pieman_71

Just heard back and not going to get it.

They've said at no point did they need to tell me it was different for IO as I was well above the LTV when I applied. They've said that's in line with HSBC guidelines and FSA regs which doesn't seem right to me (that they can advertise at one LTV rate and apply another) but there we are.

What they will offer is to keep the 240k at 0.74 above but the 60k swap to repayment needs to be at the new rate of 1.98 above + paying the £599.

I'm currently on a lifetime 1.49 above with Britannia which is IO so after today's cut I can afford some overpayments (no restrictions on this as the preferential rate finished a while back). This whole thing was about what was best long term so I'm now thinking I'll stay put for the time being, anyone disagree?

thanks