Question about Abbey's 10% overpayment limit

DJ_Mike

Sorry if this has been asked before but I couldn't find a thread that definitively answered my question.

Abbey states on its website that if "you make a repayment of more than 10% of your mortgage balance, you will need to pay an early repayment charge (ERC)".

I'm aware that this is 10% of the balance as of 1st January.

However, my confusion is over statements elsewhere that you are allowed overpay up to 10% of your capital each year.

My regular monthly repayments will, themselves, pay off part of the capital as well as paying off the interest.

So without overpaying, I will still have paid off a small percentage of the capital over the course of the year.

Does anyone know, therefore, if the 10% limit applies to payments that are made above the capital that you are already scheduled to pay off, or does the capital that gets paid off each month also count towards the 10% limit?

Thanks,

M;.

jill2002

Hi,

The 10% applies to the balance outstanding at 31st December each year. Therefore you can pay 10% of your mortgage balance between 1st January to 31st December of your balance at 31st December. Minimum lump sum is £500. As you are on a repayment mortgage you will be asked if you wish to reduce your term or reduce the monthly payments. Obviously at the end of each year your mortgage balance will be reduced from your normal repayments. It is different for Flexible mortgages if you have one.

DJ_Mike

Hi jill2002, thanks for the reply. It doesn't quite clear up my confusion though - is the 10% purely for overpayments? Say, for example, my balance was £180,000 at the start of the year, and I paid off a lump sum of £18,000 on the 1st of January - what would then happen with my remaining monthly payments (i.e. direct debits) for the rest of the year? Surely as soon as they took the first monthly payment from me, I would go over the 10%?

Edit: Never mind - I actually spoke to Abbey just now, the chap on the line said that the 10% overpayments are in addition to regular monthly repayments, so those don't count towards the 10% limit!

luckyfool

Purely the overpayments. Capital repaid through your normal monthly payments does not count.

DJ_Mike

And that just confirms it! Thanks for your replies!