When remortgaging.....

save-a-lot

Hi

Hope this isn't a daft question... when is the best time to pay off a lump sum on a mortgage?

If I pay a lump sum to a new lender when I remortgage will this payment come straight off the cash balance, for example, if I paid off £10,000 from a £70,000 mortgage would this reduce to £60,000 or would alot of it be swallowed by interest charges???

OR

If I pay it off now, before remortgaging would lots of the cash get eaten up by interest.

Cheers
Phil

silvercar

Get a redemption figure from the old lender and redeem it with XX from your new mortgage and YY from yourself. The solicitor acting for the lender will be able to sort the mechanics out.

Joe_Bloggs

I don't see why this should be a problem if remortgaging. The lump sum funds should be considered like an additional with your new lender. This could also be wishful thinking on my part. With my lender my interest rate will eventually become equal to their standard variable rate. This is termed BMR with the Nationwide. Under these circumstances there are no penalty fees for overpayments on this rate. Your terms and conditions of your mortgage are probably different. Some mortgages are fully flexible in that you can make overpayments of any value at any time. Many are more restrictive and have limits on the amount and sometimes on when it makes any sense to pay. Ask your existing lender for advice. Ask them for a redemption quote this will help you quantify the costs of leaving a lender. They may want to keep your business.
J_B.

MortgageMamma

Best thing to do is check your current mortgage contract and if it allows you to make overpayments without penalty and if so, to what amount. Most modern mortgage contracts offer an overpayment of 10% of the oustanding balance of the mortgage per year without charging but best to check to be sure. next thing to consider is if this will be deducted from your outstanding loan immediately or not or if your interested is calculated annually monthly or daily. Your mortgage lender should be able to tell you this.

If you look for a new mortgage you need to consider how much, if anything the current lender will charge you for redeeming your mortgage and moving to another lender. this is known as an early repayment charge and usually only applies for a certain period, i.e. the early years of the mortgage. When you have done this and you are happy get professional help and ask a mortgage advisor to find you a mortgage where you can make an overpayment of so much. Best to find one where interest is calculated daily and where there are no early repayment charges after your set period.

Good luck