Mortgage t&c advice needed

Ivrytwr3

Hey all,

I require advice regarding my mortgage t&c overpayments policy. These are my t&c's (click to enlarge)



My mortgage is £86228 over 25 years.

I see i can make a £500 overpayment in January, which i intend to do, but my questions are this:

1. I have a free £310 from August onwards and would like to use this to overpay my mortgage every month commencing September (this is on top of the £500 i will pay in January). Can i do this with this mortgage and is it advisable to do so?

2. What is the best day to make an overpayment (with regards to interest etc).

3. How much would you recommend overpaying and how much of the term would this reduce it by?

4. Anything else i need to be aware of, or any advice you can give?

I appreciate that the terms and conditions are laid out there, but this is my first mortgage and unsure of any pitfalls.

Thanks all.

dwsjarcmcd

Hi,
It depends whether you are in ERC period or not, I am assuming you are.
If you overpay by £310 in August it will be subject to a reduction for these, so if the ERC's are, say 4% then you would only be credited with roughly £298 per month.
The best way is to save your £310 p.m until January and add the lot to your £500, assuming this doesn't exceed 10% of the mortgage (unlikely)
Pay at the start of the month if it is daily or monthly interest or the end if its annual interest.

HelpWhereIcan

I think you are allowed to make one lump sum overpayment in January of each year that has to be a minimum £500 and a maximum of 10% of the mortgage balance.

This would mean that rather than making regular overpayments of £310 from Sept onwards, you would need to save this (say, into an instant access mini cash ISA) and then overpay it as a lump sum in January of £1240 + the £500 you already plan to overpay.

Cannot be 100% sure unless I know the lender and deal, but that is my interpretation. Believe you may be on an Alliance & Leicester deal?

Hope this helps

Ivrytwr3

I have just taken out the mortage and there is a ERC for 5 years.

So you're advice is save up the £310 per month and add it to the £500 January payment? This would allow me to pay £4220 in January total. Is this correct?

Ivrytwr3

Yes i am with A & L. How did you know that just from their T&C's?? Is it that bad a mortgage it stands out that much??!!!

HelpWhereIcan

Ivrytwr3 wrote:

I have just taken out the mortage and there is a ERC for 5 years.

So you're advice is save up the £310 per month and add it to the £500 January payment? This would allow me to pay £4220 in January total. Is this correct?

Yes, especially if I am right about who the lender is.

HelpWhereIcan

Ivrytwr3 wrote:

Yes i am with A & L. How did you know that just from their T&C's?? Is that bad a mortgage is stands out that much??!!!

No, not a bad lender at all. Just that this condition of a single lump sum overpayment in January is unusual because many lenders will allow regular and lump sum overpayments. If you look at enough mortgages in a week, you will get to recognise things like this.

Regular monthly overpayments could be an advantage as the balance is reduced in the month you make the overpayment rather than once in January of each year. Having said that, it does not make your A&L deal a bad one. There may be a difference in the interest rate that means that the disadvantage of only being able to make an annual overpayment is outweighed by the advantage of a better rate.

I have used A&L quite a lot; mainly cos of the amount they wil lend as well as other underwriting considerations, rates etc being charged and that their long term standard variable rate on some deals is 5.49% can make them very competitive for the long term.

As long as you are aware that your 'flexibile options' are restricted as above, there is nothing wrong with them.

Ivrytwr3

Thanks for the advice and that's what i will do. Save the £310 in my savings account and make a lump sum payment every January.

Ta!!