is it worth it ? how can we get around it ? Please help a newbie MFW

babybakey

Hi everyone , well we have been reading all your posts with facination and looked into how much we could save if we paid chunks off our mortgage each month only £86 a mth extra to start with i called them today to ask about it and found out every time we make any overpayment they will charge us £83 ! they said all mortgage companies do this , is this right ? and if so how do you all do so well at paying off your mortgages if your forever paying fees ?
they suggested we pay the extra each month its held on account as being in credit and we just pay it off in lumps of £100 but im not sure this will have the same effect on the interest will it ?
im terrible with numbers and would really appriciate some help here, theyve said our outstanding mortgage is £101416.74 we pay 3% currently at £459.67 and i was thinking of upping it to £550 but im worried now as im not sure it will have such a dramatic impact as we thought.

can anyone help me

Shell x

LilacPixie

who is your mortgage with?? Who do you bank with?? are you tied into a specific deal?

The reason I ask is we are tired to a specific deal and can only op 10% without penalty. I have never head of a provider that charges you £83 to overpay.

If you ban with first direct you can get a regular saver account that is 8% gross so if the charge per OP is correct and considering your low rate of interest you may be better off saving elsewhere and OPing once a year.

babybakey

the mortgage is with mortgages plc, it was a particularly high interest rate as at the time still had a old iva thingy on the credit file which we'd paid off a few years earlier.
we bank with halifax, would it be worth saving with them? im guessing getting 3% on savings or whatever the normal ones are wont be giving us quite as much as the fee once a year but itd help. will this still have the same effect on the reduction in mortgage though?

LilacPixie

do you still have your KFI?? TBH I would get the whole fees for overpaying thing in writing. Is the fee a one off £83 per overpayment, £83 per year, only if you OP over a certain amount or what. It could be the OP fees charged are a certain percentage of the overpayment and if this is the case then very little you do will make a difference unless you switch mortgage provider.

Saving rates in general are quite poor, halifax regular saver is only 2% gross. Halifax ISA is 2.8% and obviously tax free. I am assuming you are a tax payer.

How is the credit file now?? it may actually be 'worth it' to totally remortgage your home to a slightly higher fixed rate that allows Op's without penalty but that will be dependent on your history, earnings and what your home is currently worth.

alex_p

£83 is quite steep! You need to check the paperwork or call them to ask if that fee applies during the "early repayment period" - this is normally the first few years of a mortgage where you can only pay 10% or something similar.

If you are planning to make regular overpayments you need a mortgage that allows you to do that without fees.

WestonDave

If they are going to charge £83 for an £86 overpayment then its going to be better off saving the money elsewhere even at a lower interest rate so that when you can remortgage you can take out a lower figure using your savings at that point, or if the £83 is a fixed amount regardless of how much you pay off, then saving up for a while and then clearing a big chunk so the fee is a smaller percentage of the overpayment.

Plenty of people effectively overpay by putting money in a parallel savings vehicle that they regard as being ready to pay off the mortgage - I've got a load in share ISAs for historic reasons that I could just dump in the mortgage but I prefer to spread things around. There isn't any "right" way, just the right way for you depending on your mortgage and your personal circumstances.

babybakey

thanks every one , right i called back and this time went through to customer services she confirmed that it is a £83 fee every time they recalculate the mortgage so i can poverpay each month and it will sit as a credit on the account then if i want it removed from the mortgage balance we pay the £83 and thats an £83 fee every time you actually pay it against the balance wether that be monthly, annually or even weekly etc.

theyre not a good comany and even charge us £25 for not getting our buildings insurance with them it goes on every year as an insurance admin fee to spite us as we dont want to pay theirs which ill add is over 3 tiems what we pay !! not good.

I did think of another option and asked her if they would need to remortgage us or if there was a way of shortening the term , so obviously our payments go up and the term shortens but its done officially instead of just as and when we want to. she siad theres a £42 admin fee for doing it and you dont need to remortgage to do it. which i think could be an option. she said shes going to send us a calculation out to shorten the term to 21yrs ( i think its currently just over 26 yrs so knocks off 5yrs which for us will be a good start obviously i can still do the credit thing and over pay and let it sit on account if we want ( i can adjust this to suit our circumstances monthly as we pay by standing order not DD ) and then once theres a wedge have the term shortened again as she said it will just use up the stored cash or do a one off payment.

id rather not remortgage just yet as i think were best off just getting it all in order and to pay it off etc we have fees to pay which ammount to a good couple of hundred i figure while the kids are still small and my business isnt turning a visable profit ( first year trading ) were best off sinking it all in the mortgage and paying off as much as we can then when were better looking for credit with me earning a wage properly which i can prove we should get a better rate as hubbys only going to show £30k which is ace as its the most hes earnt but i doubt we'd get a good rate just yet.

ive just dug out a old statement which shows until July when we came off fixed rate we were paying 6.5% so by shortening the term by just 5yrs we still leave that safety net so we have some spare cash to over pay incase the interest rates change and then it wont hit us so bad , if that makes sense. with 3 little ones i dont want to leave ourselves in the lurch and end up struggling as we'd have no where to turn with no savings.

if anyones got any better ideas do shout as im open to all ideas like i say were new to trying to be mortgage free.

shell xx

SeriouslySeekingtoSave

Ok, first off you’ve done the right thing coming to these boards, the advice and support you can get here is amazing! Now for my $10 worth…

I am/was pretty bad with money as well. Great with saving but awful at making that money work for me. But I’ve been determined to fix that from this year in and I’m sure you can do the same if you put your mind to it.

The first step I would advise you take is to find out exactly where you stand in regards to your mortgage – it sounds like you don’t really know, which is fine, plenty of people set things up and then just forget the ins and outs. That’s ok; but if you want to make sure you’re getting the right deal, you need the facts and we do too if we are to give you proper advice. But in answer to your question of ‘Is the bank right when they say that all banks charge a huge fee to do an overpayment’? The answer is no. Some do, many more have a set percentage that you are allowed to pay off without being charged (and then it’s usually a % of your overpayment and not a set fee). Some mortgages have no limits and no charges at all. I have a split mortgage and I can put unlimited OPs on my tracker part.

So look around for your documentation and go through it. If you can’t find it then I would think it would be a case of applying to the bank for another copy of the that they will have on file. Once you have it, then I repeat, go through it. Research any terms you don’t understand, ask questions here. Research other mortgages, see where you stand in relation to how good of a deal you are currently on. I knew absolutely nothing about mortgages when I started shopping for one, hadn’t a clue what an endowment mortgage was, wouldn’t have known an offset if it bit me on the nose, but it didn’t matter. A couple of months in and I knew a good deal when I saw one. And I saw that my bank at the time (NatWest) was offering me a lousy mortgage even though they were happy to lend me a lot more than other places (because I’d been with them for years and they knew I was a very solid investment). Consider a mortgage broker for good information on whether or not to remortgage as another poster has suggested but this will depend on your situation, namely:

• How much loan to value you have
• Are you tied into this mortgage you currently have
• Is it a good deal that you are on at the moment?

I know that you would be getting charged through the nose for OPs (I consider £83 in OP fee absolutely OUTRAGEOUS btw…) but a 3% interest rate isn’t too bad. Is it fixed, tracker etc. We’d need more info. I don’t actually understand what it was your bank suggested as a way of paying it off. Others probably do but be very careful I’d hate to see you paying your bank anything like that £83 for the privilege of paying off your mortgage a bit quicker. At an interest rate of 3% if you put those OPs in a decent ISA you would actually be making more money that you’d be saving on Interest payments for your mortgage. I’m setting up a Santander which rises at 2.49% above the base rate (get out of it after a year though because the rates plummets then) so if your mortgage is fixed and the interest rates rise you’d be laughing J. And a really good savings account will also offer you a better rate than OPs on a 3% mortgage will. I’m currently in the process of trying to set up a 8% savings account with First Direct. Although that is limited to £300 a month but it sounds like that’s more than you need. These things take time to find and time to set up but if you work at it you’ll really reap the rewards both in money terms but also (I find) in a sense of pride and empowerment that you get through feeling in control of something that has run rings around you for years! It’s really liberating, and totally addictive as I’m sure any MS’r on here will 100% agree with me!

Another thing to consider is changing the term of your mortgage. I’ve read comments from people who are in the same position as you are currently as far as being charged a large fixed fee for repayments go; they get around this by changing the length of the mortgage, say from 25 years to 20 or whatever. This meant that their monthly payments went up but because they term is shorter they are paying less of them. This costs them no more money each month in terms of how much interest you pay it just mean that more principal is taken off. Many people apparently prefer this because they think they might not have the discipline to OP if the money isn’t directly taken out of their account before they get to spend it.

So a few things to think about? But the most important thing is to make sure you completely understand the terms of your mortgage, absolutely inside out!

LilacPixie

Shell - when you say it will sit as a credit on the account will you be saveing the interest on this credit??? if so do that.. If not look at the halifax web saver extra. TBH in your position I would look at the web saver extra anyway.

SeriouslySeekingtoSave

How much equity do you have in the house? I got a good mortgage when I was earning 30k and I had a 20% deposit. I shopped around a lot before I found it

You can find good mortgages with no fees at the moment, especially if you have decent equity in your house. But I’m not sure if whoever you are with will charge you to exit. Sounds like they will take any excuse!

RosieTiger

Some really good advice above, I would urge you to follow it and get a real understanding of the rules.
For context, the Chelt and Glouc. will charge us a fee of £10 if I want to reset my figures, but I can leave all as is on official payment and overpay as much as we like without any cost, provided i don't ask for the figures to be updated.
We don't so OPing costs nothing.