A&L monthly overpayments

pixiepie99

Can anyone advise on the legality of how A&L approach monthly overpayments?

My key facts document states:

"If you make a regular or lump sum overpayment on your mortgage (that is, an overpayment less than £500), the amount you owe, and so the amount of interest you pay, is not recalculated immediately, but at the end of the month in which the overpayment is made".

Which suggests to me that each month your total mortgage is recalculated and your interest falls each month that you overpay.

However, in a thread in MFW about this, the following has been said:

flipparty wrote: »

We are going to question what they say via another call (making it now) and in writing. However, it looks like jf1968 above received exactly the same response as we did

Edit: following another call to A&L we received the same response. Despite our Mortgage documents stating that for payments below £500 the interest would be recalculated at the end of that month, in reality this is not the case. The A&L customer service rep explained that no interest recalculation would be made as it was far too complicated for such small amounts on a monthly basis (contrary to what our mortgage document states).

The A&L rep admitted at the end of the call that the only way to reduce the mortgage term is to make a capital payment in excess of £500 in January and that any other additional payments have absolutely no effect until the end of the fixed term. Even at this point (at the end of the fixed term), the capital is only reduced by what has been overpaid with no interest benefits accrued whatsoever.

We will be getting this in writing apparently...

Surely what they are saying on the phone contradicts the key facts document. What do others think? And if this is the case, what can we do about it?

Thanks in advance!

skint_chick

It depends on whether you have a mortgage where the interest is calculated daily or annually. I used to have an annual fixed rate with them and overpaid but they wouldn't calculate the interest or add it until Dec each year - unless I paid over £500 in a lump sum - which would have given me an early repayment charge!

Most of the more recent ones are monthly interest -you'll know this if you get a statement every month rather than yearly - and whatever extra you pay comes off your balance at the end of every month. I got them to confirm this in writing because there's no point in overpaying if they're seeing the benefit of it rather than me! At the bottom of my monthly statement it tells me how much interest I have saved as a result of the overpayment so I guess it depends on your exact deal.

Ask them to put it in writing - then if what they say still contradicts your key features - and your offer which should be the same as your key features - send them in a letter with a copy of the offer highlighted and a copy of their letter saying overpayments don't save interest and say you're confused and considering a complaint because you feel misled.

pixiepie99

Interest is calculated monthly (as is clear from the quote from the key facts doc) but they are telling people over the phone that any overpayments won't be used to reduce the capital until the end of the mortgage term.

feisty1

pixiepie99 wrote: »

Interest is calculated monthly (as is clear from the quote from the key facts doc) but they are telling people over the phone that any overpayments won't be used to reduce the capital until the end of the mortgage term.

What is it exactly yr trying to achieve?

skint_chick

I would definitely get them to put it in writing that the overpayments make no difference because my overpayments are coming off the balance every month because I check my statements every month because I send a payment every week when my OH gets paid. And it clearly shows me at the end of each statement my total interest savings to date - so for them to say it's different for you is either wrong - or you need to send them in copies and get some confirmation in writing of why your mortgage t&c's have changed so your interest isn't calculated monthly

pixiepie99

feisty1 wrote: »

What is it exactly yr trying to achieve?

I'm aiming to overpay my mortgage by £499 each month to reduce the capital sum (and therefore the interest I pay each month).

I guess I'm trying the achieve a smaller mortgage!

Ivrytwr3

why don't you save the £499 in a high interest account and pay a lump sum including interest gained in Jan of each year? I can do this without incurring any fees as long as it is not over 10% of the mortgage each time i make a lump sum payment.

pixiepie99

Ivrytwr3 wrote: »

why don't you save the £499 in a high interest account and pay a lump sum including interest gained in Jan of each year? I can do this without incurring any fees as long as it is not over 10% of the mortgage each time i make a lump sum payment.

High interest account - that's a joke at the moment!

But I know what you're getting at and if this is the case, I'll be saving the money rather than overpaying (My first payment doesn't go out until the end of this month).

Our fixed term ends at the end of June so after that we'll be making overpayments of more than £499 which will be treated as a capital overpayment and will be recalculated immediately (if I can believe what my key facts document says).

Alan_Cross

pixiepie99 wrote: »

I'm aiming to overpay my mortgage by £499 each month to reduce the capital sum (and therefore the interest I pay each month).

I guess I'm trying the achieve a smaller mortgage!

Pixie,

I think most people's understanding of the advertised effect of making monthly or other overpayments is exactly the same as yours.

I.e. any overpayment made would reduce the capital amount outstanding and that this would trigger a recalculation for a lower minimum repayment the following month.

If this is not happening when the key facts illustration said it would then this would be:

1. outrageous

and

2. almost certainly a breach of contract

rl290

Ivrytwr3 wrote: »

why don't you save the £499 in a high interest account and pay a lump sum including interest gained in Jan of each year? I can do this without incurring any fees as long as it is not over 10% of the mortgage each time i make a lump sum payment.

A&L allow you to pay of 10% of your mortgage capital every year in January without paying a fee. They ALSO allow you to overpay up to £499 per month without incurring a fee. (Some of us in the MFW forum didn't realise this until recently!)

So, I decided to pay 10% in January AND pay an extra £499 a month (so your point re: saving the money until January doesn't work). While the 10% in January made an immediate difference to the amount of interest I owed (i.e. it was taken into account when the interest calculation is made), there remain questions regarding the monthly overpayment.

The key facts/conditions of the mortgage say that these monthly overpayments will affect the interest calculation from the end of every month... which is perfectly acceptable to me, and will dramatically reduce my overall mortgage cost and length. However, people have been told over the phone that monthly overpayments actually affect the mortgage calculation at the end of the year (i.e. they are told that interest is calculated annually at the end of the January window). One person has even been told the the monthly overpayments only make a difference to the interest amount at the end of the FIXED TERM (which seems completely ludicrous!). Over the lifetime of the mortgage, this makes quite a large difference!

Given that the key facts say that interest is calculated monthly when monthly overpayments are made, it appears to me that A&L must honour this. Thanks for the advice offered - I plan to write and get something in writing regarding this. If the answer deviates from the key facts, I guess I'll have to escalate to a complaint...

R

getmore4less

It will be possible to work out what actualy happens from the statements.

If these are annual this will take a bit of work with a spreadsheet to reverse engineer the numbers.

The more intermediate ballance points you get the better.

A common misunderstanding is that the Mortgage Payment is calculated annualy but the interest is calculated daily/monthly and added monthly and because the payment is not changing it is not clear what is happening.

If you can get Monthly statements it will be easy to see what is happening