Finding how much you owe on mortgage

blueberrypie

agile83 wrote: »

I called my lender some months ago about overpaying and the lady i spoke to advised that i wouldnt incur a penalty if i overpayed by less than £500 per month so £6000 a year, yet my mortgage offer isnt clear and i need to query it again as it mentions this "3%" thing.

The 3% is the Early Repayment Charge. It's what you pay on any overpayment which is more than the overpayment you're allowed. For example, if you're allowed to pay £6k in overpayments in a year but you pay £10k, you'd be charged 3% of the extra £4k.

I do think you need to contact A&L again and ask very specific questions on the things you're not clear about. How much *exactly* are you allowed to overpay, and when? Is it £500/month, or is it £6k/year (she might have just been giving you an example in monthly terms) - or is it a percentage of what you borrowed? What happens to each overpayment? When is it applied to your capital? How soon does it make a difference to the interest - is your interest calculated daily or what? Will they automatically reduce the term or reduce future payments, and if so, will they do it differently if you ask them? And anything else you can think of. You can't manage your money effectively if you don't understand what's happening to it.

Valli

Previous poster is spot on - there is NO POINT overpaying on your mortgage if it doesn't do what you want it to - you might want to reduce the term or the debt itself. As I mentioned there is also the issue of how what you overpay affects the interest you pay. But each mortgage has different T&Cs - what this is so good for is we can spot the various pitfalls and guide you to the questions.
I would go in for a face-to-face - if you can overpay by £500 per month then it needs to be reducing your debt as soon as it gets into their accounts so that you are quickly chipping that sum down...
In simplistic terms I have a credit card. If I make the payment when I am paid (on or before 25th) that is 3 weeks before payment is due BUT it reduces (very slightly) the interest - because the amount I owe and therefore pay interest on is smaller quicker. So I pay three weeks early and it will have a positive effect on my debt. If, however, they would only consider 'crediting' my account on a certain date then it wouldn't reduce my debt. That is how some mortgages work...all overpayments are, in effect, ignored until the anniversary date. So despite having overpaid they have had your money and ignored it. That's why you need to be sure - and mortgage contracts are legal documents and not particularly user friendly.

The key questions here would be

'What is the MAXIMUM amount I can overpay EACH month without incurring additional charges over and above my fixed rate?'

and

'If I overpay by £500 (or whatever the maximum amount is) per calendar month will my outstanding balance be reduced by that amount with immediate effect?'

(If you're THAT keen on making payments I'll PM you my mortgage details and you could pay mine ...***sigh*** )

greenbee

I have a feeling your mortgage is similar to my last fixed rate (although mine was with Nationwide not A&L). I could overpay by up to £500 a month, and in the last month of the fixed period (i.e. just before any remortgage) I could overpay as much as I liked.

My interest is calculated daily, so any payment I make has an immediate effect. I am also able to draw down overpayments if I need them at a later date, so it is also available as an emergency fund.

However, at the time, I didn't have the benefit of knowing about this forum, so it took me a while to stop them reducing my payments (they assumed that I was making the payments agains the interest). So once you have clarified what overpayments you are allowed to make, go in and see them and explain that you want to pay off capital, not the interest.

I also stopped making over the counter payments, and asked them to amend my DD to ensure I had a regular overpayment going in matching the amount I could afford to overpay by. Any windfalls I could still do over the counter (making sure, every time, that I told them it was a capital repayment, not interest).

I'm now on SVR as it's not worth me moving to another fix or tracker - the savings I would have made when I was fixing in October wouldn't have paid back the fee - and the DD remains the same, so my overpayment is increasing every time the rate goes down

Good luck with it!