Overpayment

maxitaxi_2

Hi, I'm pretty hopeless when it comes to these calculators! I've just recieved my mortgage statement and I would like to know a bit about lump sum overpaying on my mortgage. With savings interest rates so low I think this may be a good option. Like most people I want rid of my mortgage ASAP.

I took out my £60,000 Accord mortgage at 4.95% on a 10 year fixed rate approx 3 years ago. The calculation at the time meant 12 years and it was paid. My outstanding balance is £48,000. The interest is calculated daily. I do have savings and would like to know how much I can overpay as a lump sum to reduce the term, without being hit with penalties.

Can anyone help?

Robert_Sterling_3

Ask the lender,
Nationwide allow up to £500 per month and they allow you to have it back if you want it back.
Some lenders allow you to pay back 10% of the current outstanding balance per annum.
So ask YOUR lender.

pixiepie99

This should all be in your key facts doc that you got when you started the mortgage. It's typically 10% per year or up to £500 a month but seems to vary between lenders a lot so you will need to check.

maxitaxi_2

Does that mean if 10% per year is allowed, I can pay a lump sum of £18000 (£60000 mortgage) as 3 years of the fixed rate has expired. Or is it only 10% on the outstanding balance i.e £4800 (£48,000 outstanding)

Annie021063

Is this the best way?
Our current fixed rate of 5.33% ends at the end of Feb (we have paid our last 5.33% payment:j ) Nationwide's SVR is 3% so the difference 2.33% will mean a huge reduction in our payments (around £130) we want to continue paying this amount as an overpayment while we can afford it. Is this the best route? We are also saving £500 a month at present. Should be overpay more? or leave it at the £130? Waht do you guys think?

pixiepie99

maxitaxi wrote: »

Does that mean if 10% per year is allowed, I can pay a lump sum of £18000 (£60000 mortgage) as 3 years of the fixed rate has expired. Or is it only 10% on the outstanding balance i.e £4800 (£48,000 outstanding)

Most likely £4,800 (10% of outstanding balance). If you don't make the overpayment you lose it - they don't add up each year.

But you need to check with your lender as each lender as different rules.

save-a-lot

Would reducing the term be a better option. ??

save-a-lot

maxitaxi wrote: »

Does that mean if 10% per year is allowed, I can pay a lump sum of £18000 (£60000 mortgage) as 3 years of the fixed rate has expired. Or is it only 10% on the outstanding balance i.e £4800 (£48,000 outstanding)

My mortgage is set as 10% of the remaining balance each year. I too am on a 10 year fixed and also about 3 years in

pixiepie99

save-a-lot wrote: »

Would reducing the term be a better option. ??

Depends. There would be a charge to do this whereas overpaying within the rules wouldn't incur a charge.

Reducing the term also locks you into paying a higher monthly amount so if your circumstances change it could leave you overstretched.

Overpaying therefore gives you more flexibility.