Mortgage in credit not paying off the mortgage

sparkleworld

Please could someone clarify if I have this right please.

Had a mortgage review today and have come away a little confuddled as to what has been happening to the small monthly overpayments we have been making on our mortgage.
Five years ago we fixed at an amount that was £30(ish) lower than the payments we were used to, so requested that the payments remained the same with the extra money being paid off our mortgage. Yes no problem we can set that up for you.

Received a statement each year showing the agreed amount being debited with the balance outstanding etc. Everything seemed to be on track until today.

Mortgage advisor stated that our account was in credit so I thought I would clarify that this was reducing the length of the mortgage and not the payments. He answered it wasn't - apparently because it was such a small amount being paid off each month it couldn't be taken off the term. I have come away believing that this money is just sat there alongside the mortgage doing nothing!!So that's just under 5yrs at £30 lying dormant alongside my mortgage. He tried to explain it as coming off the end of the mortgage when it actually finishes:huh: (i'm still no wiser!) So what part of "Can we use the spare money to pay off the mortgage" did they miss or have I totally misread the situation.
I will be contacting them tomorrow for clarification on this but wanted it explained in layman(dummy:o) terms here first so that I have time to digest the information, and what are the relevant questions I need to ask regarding this.

Thank you for your patience

lincoln-potter

sparkleworld wrote: »

Please could someone clarify if I have this right please.

Had a mortgage review today and have come away a little confuddled as to what has been happening to the small monthly overpayments we have been making on our mortgage.
Five years ago we fixed at an amount that was £30(ish) lower than the payments we were used to, so requested that the payments remained the same with the extra money being paid off our mortgage. Yes no problem we can set that up for you.

Received a statement each year showing the agreed amount being debited with the balance outstanding etc. Everything seemed to be on track until today.

Mortgage advisor stated that our account was in credit so I thought I would clarify that this was reducing the length of the mortgage and not the payments. He answered it wasn't - apparently because it was such a small amount being paid off each month it couldn't be taken off the term. I have come away believing that this money is just sat there alongside the mortgage doing nothing!!So that's just under 5yrs at £30 lying dormant alongside my mortgage. He tried to explain it as coming off the end of the mortgage when it actually finishes:huh: (i'm still no wiser!) So what part of "Can we use the spare money to pay off the mortgage" did they miss or have I totally misread the situation.
I will be contacting them tomorrow for clarification on this but wanted it explained in layman(dummy:o) terms here first so that I have time to digest the information, and what are the relevant questions I need to ask regarding this.

Thank you for your patience

Which provider are you with?

I am no expert but from what you said that does sound misleading and I would imagine you have a pot of money doing nothing alongside the mortgage and that when the mortgage reaches the same amount as the pot then they will cancel each other out.

Least thats my take on it.

sparkleworld

It's the Halifax and that is exactly how I have come away understanding it, but just thought surely not!

Thank You

sarahevie

I'm with the halifax - and have only made one overpayment although it was very simple. I phoned up said I want to overpay mortgage by x amount they said if you reduce your payments they will drop by x amount, if you want to reduce term they will drop by x number of years.

What I think has happened is that you haven't overpaid enough to knock off a whole month yet.

We were thinking about paying £10 off a while ago as it was sitting in the account, however we were told they could only reduce our monthly payments rather than knock time off our mortgage as it wasn't enough to knock a whole month off if you see what I mean.

We have decided to save for the year in an isa as we have maxed our 10% overpayment limit.

In doing this it should knock a definite number of months off the term

I certainly don't agree with the notion that they have a pot sitting separate to the mortgage that hasn't been my experience with the halifax. When we made our overpayment we were sent a statement in the post saying your mortgage account has been credited with x amount and therefore your term is now 21years.

sarahevie

I've just re read your post and I am convinced that this is the case.

You haven't overpaid enough to knock a whole month off the mortgage yet, but eventually you will.

If you never make another overpayment your final mortgage payment will be slightly lower, but you will still end your mortgage at the same time, as you haven't paid enough to take a month off the term.

Hope this makes sense. Would be interested in other people's takes on this

sparkleworld

Hi Sarahevei, I think my ramblings may have been confusing, the "overpayments" made so far definitely covers 1 months mortgage its actually enough to cover 7 months mortgage payments. (60x30 =1800)

Thankyou for trying to explain it to me

Regards
*Sparkle*

lincoln-potter

mmm very odd.

I too am with the halifax although years gone by only paid large amounts off, but with my current mortgage I paid £300 off and that was taken from the term even though it is less than a months mortgage amount.... So the plot thickens.

Maybe like sarah says put it into an ISA then pay the lump at the each of each year?

wheatchief

I made an overpayment to my mortgage provider the other day, they asked whether i wanted it paying off the mortgage or applying it as credit. I can only imagine someone would add it as a credit just in case they get in trouble and cant make a monthly payment.

Your provider must of made a mistake, i cant imagine why they have sat back for 5 years with no contact. certainly does sound very odd.

I hope you get to the bottom of it.

sarahevie

Very odd then - sorry to have not been able to help more.

Please let us know how you get on - I'm sure there's a lot of halifax mortagagees on the board who would be interested.

Good luck with getting to the bottom of it.

I made my overpayment via the phone and they were very helpful, which was a relief as I didn't even know you could knock it off the term or payment so it all had to be explained. :rotfl:

They even worked out my 10% limit so I didn't incur penalty as I wanted to pay the max off. Unfortunately I did it straight after receiving the annual mortgage statement, prompted me to do it, so will have to wait a whole year before I can overpay again. (9 months and counting) :rotfl:

LilacPixie

I have a theory.. but it may be flawed but its based on my understanding of the overpayment process with halifax.. i'll use my figures to see if that helps.. Our mortgage payment is £703 a month but we pay £750 by agreement with halifax (standing order not DD) Everymonth we technically 'overpay' by £47.. now this overayment can either reduce your monthly payment or your term but halifax charge £10 to adjust term on our mortgage so what we are doing is continuling to OP the '47' quid and then once a year or ossibly less often we will adjust the mortgage term.. The payments we make are saving us interest but at the moment we are technically 'in credit' with mortgage payments. Its handy incase we need to take a payment holiday while i'm on maternity leave..

sparkleworld

Well I have contacted the Halifax and spoken to a very helpful chap who has reassured me my money has not been languishing in a pot somewhere in the ether but has actually been coming off the mortgage.:T It hasn't been reducing the term of the mortgage as only I/we can authorise that, but it has been coming off the mortgage therefore reducing the daily interest accrued each month.
He said they were not allowed to just keep that money alongside the mortgage, but understood how the mortgage advisor may have come to this assumption as its just a file for their records as to how much we have overpayed the mortgage by. So in theory yes its in credit but the actual money has been going off my mortgage.

Rather concerned that the senior mortgage advisor at our branch couldn't explain that instead of telling me as one pile increases and the other pile decreases when they meet then your mortgage is paid off!

All I have to hope now is that the overpayments dont exceed the 10% limit and they wallop me charges for that as the balance gets lower. will keep an eye on it now;)

Thank You all for your reassurance

Hopefully, I too, can post to say I am mortgage free..........

Love 'n' Rainbows
*Sparkle*