Overpayments didn't reduce mortgage length

Snoozle

mintedmatty wrote: »

Contractually, legally you are probably in the right? but seriously who would ever complain about having their mortgage paid off earlier? Even if their mortgage papers stated 25 years I cant picture anyone kicking up a stink???? Then again having worked in the banking industry I do see your point about having to do it that way? Would be pretty easy to put it in the KFI and other documents what will happen if you overpay?

:rotfl:you would think that no one would complain about having their mortgage paid off earlier, but believe me, people can and do ! On the odd occasion where we forgot to reduce the payments, the customer nearly always complained. In all honesty, the vast majority of the customers I ever dealt with didn't want to pay it off quicker, they made lump sum payments in order to reduce their regular monthly outgoings. Obviously this is the mortgage free wannabe board, so no one here is going to be thinking along those lines.

And I can't speak for all banks, obviously, but where I worked, it was stated in the mortgage documents what would happen, and it stated that it would reduce the monthly payments unless you requested otherwise. A lot of customers didn't bother to read it. Anyone who is reading this board is probably pretty savvy about their money, but in the outside world its unbelievable how many people will sign away 25 years of their life and proudly tell you that they can't be bothered to read the paperwork.

u02ja3

doesn't it all work out the same anyway? If you keep the total amount you repay each month the same despite overpayments, surely the term will reduce naturally by making the overpayments? If that makes sense...!?

MORPH3US

Why would anyone ever pay off a lump sum on their mortgage only to reduce the payments rather than the capital... it doesn't make sense to me but there must be a good reason.

getmore4less

MORPH3US wrote: »

Why would anyone ever pay off a lump sum on their mortgage only to reduce the payments rather than the capital... it doesn't make sense to me but there must be a good reason.

It's the reduction of the capital that reduces the payments.

MORPH3US

I understand that getmore4less...

But the reduction in capital can either result in 1) a shorter term with the same payments or 2) lower payments for the same term...

I and I would imagine 99% of overpayers opt for option 1, but I am hoping someone might know why anyone would consider option 2.

Antispam

I have same problem have 17 years left on 20 year mortgage and want to pay a lump sum. This will only lower my monthly payments

I owe around 55k @ 2.39% and pay £320 a month, I want to pay £18k off and my payments will go roughly £100 less a month

mintedmatty

MORPH3US wrote: »

I understand that getmore4less...

But the reduction in capital can either result in 1) a shorter term with the same payments or 2) lower payments for the same term...

I and I would imagine 99% of overpayers opt for option 1, but I am hoping someone might know why anyone would consider option 2.

I suppose it frees up monthly capital to re-invest or spend elsewhere? but I agree that hardly anyone would choose this option? but as someone said further up there is bound to be someone somewhere who wants to do it like this I guess?

getmore4less

MORPH3US wrote: »

I understand that getmore4less...

But the reduction in capital can either result in 1) a shorter term with the same payments or 2) lower payments for the same term...

I and I would imagine 99% of overpayers opt for option 1, but I am hoping someone might know why anyone would consider option 2.

I think 2 is quite common, people have a change in circumstances or other demands on their monthly income.

eg. Might be down sizing jobs after redundancy and use a redundancy paymnt to lower monthly.

Another common reason is to give flexability, reducing term means you are contracted to the higher payment, reduce the payment and overpay as and when you want gie you the choice to have a smaller payment if you want.

The important point is it makes no difference to the total amount paid or the term for the same total input.

getmore4less

Antispam wrote: »

I have same problem have 17 years left on 20 year mortgage and want to pay a lump sum. This will only lower my monthly payments

I owe around 55k @ 2.39% and pay £320 a month, I want to pay £18k off and my payments will go roughly £100 less a month

So overpay by that £100 evey month.

mintedmatty

getmore4less wrote: »

I think 2 is quite common, people have a change in circumstances or other demands on their monthly income.

eg. Might be down sizing jobs after redundancy and use a redundancy paymnt to lower monthly.

Another common reason is to give flexability, reducing term means you are contracted to the higher payment, reduce the payment and overpay as and when you want gie you the choice to have a smaller payment if you want.

The important point is it makes no difference to the total amount paid or the term for the same total input.

Im not sure I follow you? do you mean even if you increase your payments u will still end up paying the same amount in total?