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Overpayment queries

edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
9 replies 1.1K views
MellydMellyd Forumite
20 Posts
edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
Hello everyone

I just hope someone can help with my queries. I have two mortgages with HSBC:

1. 136,218.50 fixed until June 2010 @ 5.29% monthly payments are £906.45 and I have just increased the direct debit by £50.00 to overpay - it has to be done this way and I can't just make additional payments. (£50.00 is a good affordable amount for us right now).

2. 71,985.16 tracker mortage @ 1.49% (0.99% above base rate) monthly payments are £298.34 - fully flexible to make overpayments etc.

I e-mailed HSBC for some advise about overpayments on my tracker mortgage and why when I make an overpayment (made a couple last year) the monthly DD reduced I got the following reponse:

Following a change to our mortgage system, payments are no longer automatically rescheduled or letters sent when lump sum payments are made.

All additional payments are used to reduce the principal balance of your loan. As we calculate interest on a daily basis any reduction in the balance is reflected immediately in the interest calculation.

Interest will continue to be calculated on a daily basis, based on the remaining balance and interest rate.

If you want your payments to be recalculated you will need to contact us each time you make a lump sum reduction.

Alternatively, you can ask us to keep payments at the current level for the loan term to be impacted.

Please note that any credits made to your mortgage are permanent transactions that cannot be refunded.


If I'm really honest i just don't get it!! Especially the part in red - so can anyone help please? I now I should focus on paying the mortgage with the high interest but the tracker provides more flexibility so if I have a sapre few pounds in Feb and want to overpay I can!

Do you think I'm doing the right thing?

Any help/advise would be greatly appreciated.
Many thanks
Mellyx
MFW 2010 No. 145 £449/600 :)
Mortgage @ 1.4.10 £206,475.19:eek:
Sealed Pot Challenge No. 908

Savings Challenge £0/£4500 :o

Replies

  • 'Alternatively, you can ask us to keep payments at the current level for the loan term to be impacted.'

    it sounds like if you want your loan term to reduce you need to ring to let them know you want your standard payments kept the same, it sounds like every time you overpayed they reduced your standard payment instead.
    hope this was helpfull & good luck with your o.p's
    Mortgage free:beer:

    [/COLOR]
  • Thanks for you reply...banks love making it difficult for us!
    Mellyd
    MFW 2010 No. 145 £449/600 :)
    Mortgage @ 1.4.10 £206,475.19:eek:
    Sealed Pot Challenge No. 908

    Savings Challenge £0/£4500 :o
  • ViolaLassViolaLass Forumite
    5.8K Posts
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    Actually, sounds to me like you need to contact them whenever you make an overpayment to let them know whether you want the monthly payment re-calculated or the term shortened. "You will need to contact us" or "you can ask us" sounds like you should get in touch in either case. I have read of other cases like this where they sit on the overpayment until you tell them what you want them to do.
  • Well, I read it that if you don't contact them they apply it to the loan and then recalculate the interest. Therefore, your monthly payments reduce each time you make a monthly payment because the amount the interest is payable on has decreased.
  • ViolaLass wrote: »
    Actually, sounds to me like you need to contact them whenever you make an overpayment to let them know whether you want the monthly payment re-calculated or the term shortened. "You will need to contact us" or "you can ask us" sounds like you should get in touch in either case. I have read of other cases like this where they sit on the overpayment until you tell them what you want them to do.

    Thanks for your reply - I think I will follow every OP I make just in case - annoying if I want to make a couple in a month but nevermind.
    Thanks again :)
    Mellyd
    MFW 2010 No. 145 £449/600 :)
    Mortgage @ 1.4.10 £206,475.19:eek:
    Sealed Pot Challenge No. 908

    Savings Challenge £0/£4500 :o
  • ViolaLassViolaLass Forumite
    5.8K Posts
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    How about when you next make an OP you call them and ask "if I hadn't contacted you, what would you have done?". They might be useless and give you a hint that you need to call each time or you might get a more helpful answer. Good luck either way!
  • JonbvnJonbvn Forumite
    5.6K Posts
    Part of the Furniture 1,000 Posts
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    OP, do NOT overpay the tracker mortgage, since it has a much lower interest rate than than your fixed rate.

    HSBC allows you to overpay your fixed rate by 20%.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
  • Jonbvn wrote: »
    OP, do NOT overpay the tracker mortgage, since it has a much lower interest rate than than your fixed rate.

    HSBC allows you to overpay your fixed rate by 20%.

    I do agree but there's no flexibility it has be a set amount each month so for example if we have a spare £100 at the end of one month I'd like to pay it on to the mortgage the tracker provides the flexibility to do this. I did check this with HSBC.
    Thanks
    MFW 2010 No. 145 £449/600 :)
    Mortgage @ 1.4.10 £206,475.19:eek:
    Sealed Pot Challenge No. 908

    Savings Challenge £0/£4500 :o
  • jamesdjamesd Forumite
    24.7K Posts
    Part of the Furniture 10,000 Posts Name Dropper
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    The lack of flexibility isn't a big problem. Apply for a 0% for purchases for 12 months credit card. Use that card for normal spending and lets the balance owed on it vary throughout the year depending on whether you have more or less free at the end of each month. Since it's 0% interest rate it won't cost you anything on the months when you're a little short.

    Three months before the end of that deal apply for a new 0% card and switch spending to that one, using the saved spending money to clear the balance on the old 0% card so you never pay interest. Adjust the monthly payment on the mortgage up or down so that over the following twelve months it clears any balance you've accumulated. If you don't end up owing a little money on the card, increase the mortgage payment a little so you will in the following year.

    Or look into stoozing and deliberately set out to borrow lots of money at 0% so you can save mortgage interest at the fixed rate. But don't do this until after 2010 because it'll look bad to lenders if you have a lot of outstanding unsecured debt on cards. Won't matter between remortgage deals.
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