The widely differing terms of overpayments

JoeA81

Hello,

Me and the GF are looking into Mortgages in preparation for possibly putting in a offer for a house in the not too distant future.

We have decided that a 5 year fixed rate would be best for us at the moment, but are also keen to have the ability to overpay by a reasonable amount.

My question is, many of the mortgages seem to say things like "you are allow to overpay by 10%" but 10% of what? Some of the websites (such as HSBC) clearly say that you are allowed to overpay by 10% of your normal monthly repayment, which doesnt sound like much to me. But other websites (like Co-Op) say "additional payments up to10% of balance" are allowed, which seem like a huge amount! And other websites just say "overpayment of 10% allowed" and dont say what they are reffering to.

We've been looking at the Co-Op 4.99% 5 year Fix, as the overpayment seems so generous, but I'm not really sure if the other mortgages I've been looking at are actually similarly flexible with their overpayment, because they dont explicity say.

Is there a standard thing for all these 10% values? Like is it generally 10% of the monthly repayment, or 10% of the balance? What is normal?

(P.S. when I say overpayments are allowed, for "allowed" read "not charged a fee"!)

getmore4less

Don't forget the overpay by upto £500 that some lenders have.

Check what the fees are to change term if these are free you can change your payments that way.

TeddyBear_2

In the case of HSBC, then it's 10 per cent of the monthly mortgage, but in the case of the Co-operative, I'd be inclined to think up to a threshold of 10 per cent of the total sum borrowed. In other words, I interpret that, once your overpayment reserve reaches 10 per cent, you can't overpay further, but I'm open to correction on that point. However, before deciding on a specific product or lender, I would clarify their terms and conditions.

whitewing

Have you actually been to a (whole of market) mortgage broker?

They would be able to advise on this and what's realistic.

Comyface

I have a Halifax mortgage and my 10% is 10% of the amount allocated to the deal in a rolling 12 month period. Or 10% a year as I say!

So I borrowed £82k on a fixed rate. I can therefore overpay £8200 in the first year of the deal. If I do that, I can then overpay £7380 in the second year (10% of the amount now allocated to the product, as it's been reduced by 10% IYSWIM).

opinions4u

JoeA81 wrote: »

We have decided that a 5 year fixed rate would be best for us at the moment, but are also keen to have the ability to overpay by a reasonable amount.

Good thinking. Try to be active about using it too!

Is there a standard thing for all these 10% values? Like is it generally 10% of the monthly repayment, or 10% of the balance? What is normal?

There is no "normal". Find the deal you want. Ask the question. If the answer doesn't give you the flexibility you require then go elsewhere.

Different lenders will have different rules for different products. If overpayments is a flexibility you require do as you're doing - make sure you understand exactly what flexible options you get for your money!

JoeA81

Thanks for the advice guys. It seems we need to check the t&cs carefully for each mortgage we are looking at. Pity most of the websites give scant details in most cases, so will need to start ringing around.

Re: going to a mortgage broker - I was kind of of the understanding that if your requirements for a mortgage were reasonably straightforward, and you know exactly all the features you are looking for, there is no reason why you cant find a mortgage on your own?

Soot2006

We just got a Nothern Rock mortgage 5 year fix (first time buyers) with unlimited overpayments - now I'm just hoping to win the lottery so I can leave just £1 in my mortgage account hahaha ...