Overpaying by renegotiating the length of the mortgage

womblingfour

Has anyone made overpayments by temporarily renegotiating the term of their mortgage?

We have made the maximum overpayment for this year but have savings left that we want to pay across.

Our mortage company will let us shorten the term of the mortgage so we can make larger payments each month.

My DH has been speaking to the mortgage provider about this and has been told that we can then lengthen the mortgage to it's original term when our savings have run out and we can no longer afford to pay at the higher level.

I am however extremely nervous of doing this. What do you think?

LilacPixie

hmmm difficult one. TBH i don't think i am really understanding the senario, too early for me.

I am guessing you have a motgage deal that allows 10% overpayments a year without penalty and you have reached that figure? You still have savings left and want to increase your contractual payment until those are exhausted then revert back to your lower contractual payment?
If thats right my questions to you would be how much is you lender chargeing to do these changes?
Are they guarenteed to revert the term back again when you want or could they refuse and you be left unable to meet monthly payments?
Where are your savings at the moment, AER?
What is the apr on your mortgage deal,
when does the deal expire.
what is the penalty for buying yourself out the deal (ercs?)

I would be very nervous of doing this TBH, lending criteria seems to change daily and I would be worried i was left with a mortgage payment that was unsustainable without savings and would then be plunged into financial problems

Caroline73_2

If they can't guarantee to be able to change back I'd be wary too. Can you put the money into ISA's instead and then cash them in when you have enough to pay off the mortgage?

Queen-Bee_2

Hi Wombling4

I've done exactly this with Nationwide. Stuck with a fixed term of 4.59% until March 2011, a series of sudden changes left me with more savings and a desire to drastically reduce my mortgage, as a precursor to vastly reducing my outgoings in the longer term.

I was limited to 5% overpayments per annum, which was inconvenient as I wanted to repay much more. But in exploring the options, I discovered that I could reduce my term which would put the monthly payments up, in effect, allowing me to repay. Ultimately, I shortened the term to terminate in March 2011 (the end of my fixed term), which put my monthly payments up hugely - to just under £4k per month.

Nationwide assured me that they would allow me to extend the term again at any time, though I've yet to put this to the test. To start with there was no fee for changing the term, but now they charge £20 each time you change it.

The arrangement has allowed me to make massive inroads into the mortgage, and although I'm thinking of extending the term again, I have been very pleased with the arrangement so far.

It's all in my diary if you want to take a look,
Best wishes
QB

womblingfour

Sorry it's taken me so long to reply. I have a one year old and a two year old so not much time to log on.

Queen-Bee, that's exactly what we're thinking of doing. Glad it's working for you. We have enough savings to 'overpay' by reducing the term until the end of next year which is when our fixed rate deal expires. I think at that point we are free to remortgage and will then be able to revert to a longer-term mortgage? My main concern is that we won't be able to re-mortgage and will be unable to meet the monthly payments.

Thanks for directing me to your diary, I'll take a look.

Sugarhunny1

Queen-Bee wrote: »

Hi Wombling4

I discovered that I could reduce my term which would put the monthly payments up, in effect, allowing me to repay.

Nationwide assured me that they would allow me to extend the term again at any time, though I've yet to put this to the test. To start with there was no fee for changing the term, but now they charge £20 each time you change it.
QB

Hi,

We too have managed to reduce the term of our mortgage and we too were assured by Nationwide that we could revert to our original mortgage agreement/terms/payments at any time we needed to. Again, like Queen Bee, we managed to change it before they introduced charges.

HTH!

Sugar xxx