Allowed to overpay 10% per year - what does that mean?

pstones578

Is 10% per year from 1st Jan to end of year or is from when you make the first overpayment to 12 month on?

I'm with Northern Rock.

lola34

I always assumed it would be dependant on individual mortgages, we are with the Woolwich and get an annual statement at the end of Septmeber so I always class the year as October - September - hope this helps

dimbo61

You need to give Northeren Rock a call but good luck on overpaying 10% each year

cake21

Agree with dimbo61. I assumed that my 10% limit was for the 12 months covered by my mortgage statement, but actually it was Jan 1 - Dec 31 (I'm with Coop).

Good luck with the OPs anyway

originalmiscellany

If you are going to overpay, then you should check with your mortgage provider - we should have (but didn't) overpayed 10% and kept our payments the same - it would accelerate the process no end! Rather we let what we pay drop down, as we owed less money.

Just a small point but useful.

2011_will_be_debt_free

dosn't it mean that the OP can pay 10% of what they normally do each month? (if they want to do it that way)
So if the morgage repayment is £500 per month then they can pay £550 a month and do it that way?

sarahevie

I've just overpaid my max 10% with the halifax - very annoyed with myself - I assumed you would be able to pay 10% per annum Jan-Dec so thought that I was being clever getting my 10% in before year end. Then starting another 10%.

However they classed it as 'rolling' and therefore cannot make another overpayment for another 12 months. I wasn't sure if she meant from Nov (when we originally took our mortgage or Dec when I made my last 10% payment - as it is fairly irrelevant as we are talking about a fortnight difference as we purchased 27th Nov 07.)

I was given the option with halifax (although when I phoned up it wasn't that clear as she said reduce payment or term and I had to get them to explain the difference). To reduce mortgage payment would have knocked £90 a month off, tempting as I'm a SAHM with a tight budget, or knock a HUGE 6 years off the term we went with term reduction.

pstones578

originalmiscellany wrote: »

If you are going to overpay, then you should check with your mortgage provider - we should have (but didn't) overpayed 10% and kept our payments the same - it would accelerate the process no end! Rather we let what we pay drop down, as we owed less money.

Just a small point but useful.

I've been thinking about overpaying and reducing the payments. Here is my reasoning.

If I overpay and reduce the payments I am putting us in a position where if we ever suffer a loss of salary we are in a better position to still pay our mortgage as the payments will be lower (we currently pay £780 pcm).

Also, any reduction in payments I will be saving up including anything over the 10% limit that we can put to one side that we are not allowed to overpay due to the terms of the mortgage. We will then use all this money when it comes to renew our fixed rate mortgage by making a bulk overpayment just after the fixed term ends but before we renew to a new fixed deal as we will be under no obligation to only pay 10% for a very short time.

Does anyone see a hole in that plan?

dimbo61

You can if you have the spare money every
month just reduce the term

cake21

2011_will_be_debt_free wrote: »

dosn't it mean that the OP can pay 10% of what they normally do each month? (if they want to do it that way)
So if the morgage repayment is £500 per month then they can pay £550 a month and do it that way?

If their mortgage outstanding was say £100,000 at the start of the 12 month period (whatever that is ) then they can overpay 10% i.e. £10,000 during that 12 month period. It is not connected to the minimum repayment.

pstones578 wrote: »

I've been thinking about overpaying and reducing the payments. Here is my reasoning.

If I overpay and reduce the payments I am putting us in a position where if we ever suffer a loss of salary we are in a better position to still pay our mortgage as the payments will be lower (we currently pay £780 pcm).

Also, any reduction in payments I will be saving up including anything over the 10% limit that we can put to one side that we are not allowed to overpay due to the terms of the mortgage. We will then use all this money when it comes to renew our fixed rate mortgage by making a bulk overpayment just after the fixed term ends but before we renew to a new fixed deal as we will be under no obligation to only pay 10% for a very short time.

Does anyone see a hole in that plan?

If you're disciplined enough to keep the money aside (ideally in an account earning more interest than your mortgage rate) than I think it's a brilliant idea. I don't have that kind of discipline and in a real emergency I could get my overpayments back anyway (make sure you check with your mortgage provider before assuming that) so I always reduce the term.

amancalledmartin

Depends on the mortgage. On ours we can make an overpayment of up to 10% every January. One lump sum and if we miss it we're screwed or we get early redemption charges. I'm currently in the process of trying to sort out exactly how much we can overpay by (as we can't afford 10%). And also who I make the cheque payable to....