Overpayments query - can I aggregate 10% per year for three years?

mortgagequery

Hi there,

We are looking to borrow a further GBP60,000 on our existing mortgage of GBP302,595, so that we can build an extension. We are on a fixed rate mortgage from Abbey which ends in the summer of 2012, with an early repayment charge of around GBP11,000.

Our mortgage terms state that we may "without having to pay an early repayment charge, make additional capital repayments of up to 10% of the loan for each year".

We have never made an overpayment in the 2.5 years we've had the mortgage, and I interpret this as meaning that since we are now in the third year, we ought to be able to repay three years of 10% repayments, compounding to GBP82,591 of the existing mortgage.

This could be added to the GBP60,000 further advance, so that we could have a mortgage of GBP220,004 at the existing 5.69%, and an additional GBP142,591 at a new much cheaper rate, now that interest rates have collapsed.

However, I've been told by Abbey that given we have not made overpayments, it is only possible to repay 10% in the current year, so we would only be able to reduce our outstanding fixed rate balance and increase the further advance by GBP30,260.

It seems to me that this boils down to the legal meaning of the phrase "10% of the loan for each year" - which implies it would be possible to aggregate three years of overpayments. Without the for, it would make sense that we would have to make the 10% repayment within a given year.

Could someone please give me a view on this?

Also, if we can argue this successfully, does anyone know a lender that would take a second charge for the further advance, with Abbey as the principal mortgage lender?

Thanks

opinions4u

No chance! 10% each year. If you don't use it you lose it.

mortgagequery

Thanks. I did speak to a conveyancing solicitor last night though who agreed that the 'for' on my original mortgage offer referred to above is a problem for Abbey. He described it as very sloppy legal drafting, and has suggested writing to the financial ombudsman as soon as Abbey comes back to say I've no leg to stand on.

I'll let people know how I get on.

herbiesjp

mortgagequery wrote: »

Our mortgage terms state that we may "without having to pay an early repayment charge, make additional capital repayments of up to 10% of the loan for each year".

But you are paraphrasing

You are only quoting part of section11

The paragraph before that refers you to section 10 that explains the penalties - and it is therefore relating to each year in which an ERC applies

It can only be 10% in each year - as if it was rolled up you would be paying more than 10%

mortgagequery

Thanks - I think I see what you mean. It's the following sentence which makes the picture clearer 'overpayments in excess of 10% each year will attract an early repayment charge'. No leg to stand on!

dimbo61

You owe over £300,000 on your mortgage and you want to borrow a further £60,000 to build an extension. Total £360,000 ( give or take a few K )
At the same time you are allowed to overpay by up to 10% a year ( but you have not overpaid a penny !)
You are fixed on 5.69% until the summer of 2012
Now if your lender will loan you the extra £60,000 to build the extension( at 5.69% ) and you repay the normal payment and 10% extra each year for 3 years your mortgage debt will be less than £200,000 by summer 2012.
But if you have £36k sat in the bank why would you borrow that sum and pay interest of 5.69% on it!
This also depends on LTV in the current market GOOD LUCK