How does the 10% rule work?

mikeydpippin

I have just remortgaged a £74282 mortgage for 8 years fixed for 2 years at 4.99%.
I want to overpay the maximum without an early repayment penalty the maximum allowed is 10% per year.What does this figure calculate at considering the capital will reduce.
Would i be right in saying it would be £7428.00 per year / 12 = £619 per month
and the 2nd year would be the balance at Jan 2010 / 12 is this correct?.

clearmydebts

Hi,

Sorry, don't know the answer but thought I would bump you up the thread a bit!

wishiwasarichgirl

just call your mortgage people, I asked mine the same question a year or two ago and she told me the exact amount I could overpay per year (it wasn't worked out on a monthly basis but other banks may be different i suppose)

It only took 5 mins on the phone, easier than asking on here, waiting for hours and still not knowing the answer as none of us are actually your mortgage provider.

ailuro2

When we were tied to 10% it was the balance on your annual statement you could pay 10% on, not the remaining balance. It doesn't make much of a difference as you can put any extra dosh into a higher interest savings account, and the difference, if any on around 1% of the money will be nominal.

Every provider is different though, so as another poster said, take 5 minutes to phone and check.

DawnW

with mine, it is 10% of the total owed at the beginning of the year, eg I owed 70k at the start of the year (when I took out the mortgage) so could overpay by 7k. Next year, it will obviously be less. Incidentally, I am with C&G, and as well as this lump sum 'capital' overpayment, I can also overpay monthly by an amount not exceeding the amount of the regular monthly payment, without falling into the erc trap. Do ring your mortgage company and check exactly what is allowed, as it may not be clear on your written mortgage t&c - it wasn't on mine. I am choosing to reduce the monthly payments rather than the term at the moment, which is another option that some providers offer. It has gone from £787.87 :eek: down to 667.34 since april when the payments started - and that is due to overpaying, not rate cuts, as I am on a fix. That is a bit less of a worry in these uncertain times jobwise, and I can still overpay:D

MrMicawber_2

The rule varies so you are best to look at your product T&C's AND phone up and check. I have recieved incorrect information before now which is why I suggest you check the T&C's yourself and then then double check and confirm talking to someone.

I have had products with different rules:

1) Allowed to pay off in each 12 month period 10% of the balance when the product was taken out. So say 3 year fix, 100k balance at start of fix, allowed to pay off 10k per year.

2) Allowed to pay off in each 12 month period 10% of each year's starting balance. So in this case the amount you can pay off reduces each year.

_Andy_

mikeydpippin wrote: »

I have just remortgaged a £74282 mortgage for 8 years fixed for 2 years at 4.99%.
I want to overpay the maximum without an early repayment penalty the maximum allowed is 10% per year.What does this figure calculate at considering the capital will reduce.
Would i be right in saying it would be £7428.00 per year / 12 = £619 per month
and the 2nd year would be the balance at Jan 2010 / 12 is this correct?.

You need to ring your lender to check. The danger here is that someone on the forum gives you the wrong information. One call to your lender and you'll know for sure.