Woolwich Fixed Mortgage overpayment advice

KFT

We have a 10 Year fixed Mortgage with the Woolwich. The rate is at 4.98% and we have 6 years to run.

We are allowed to overpay 5% fee free, which we have done. We have no other debts and would like to overpay more of the mortgage. The Early Repayment Charge is 6% of the amount repaid.

Therefore could some please give us some advice if we should overpay? from my point of view it is only costing us an extra 1.02% (6% charge - 4.98% interest rate). Am I correct in looking at looking at this in this way, or is this too simplistic?

Also how would this work in principle? For example if I paid off £10,000. Would the Woolwich reduce the mortgage by £9400, therefore keeping £600 as the 6% fee?

Many thanks for your help.

Thrugelmir

KFT wrote: »

We are allowed to overpay 5% fee free, which we have done.

Is this per annum?

Ms_Sophia

The Early Repayment Charge is usually when you pay your o/s mortgage in full. What you want to do is called overpayments and capital repayments. I understand that capital repayments are allowed for your mortgage as 5% max. What you need to check is if overpayments are allowed. If they are not, then I guess you cannot do what you've planned.

The 6% ERC will most likely to be calculated from the total current o/s mortgage or maybe even from the total initial mortgage amount.

KFT

Thank you for your replies.

Yes the 5% is per annum. I have just spoken to the Woolwich who have confirmed I can make further overpayments but they will be subject to a 6% charge of the amount repaid. Therefore if I were to overpay £10,000 it will actually only overpay my mortgage by £9400 (£600 is the charge).

Therefore my original assumption of the making an overpayment will only cost me another 1.02%(6% - 4.98%) But would save me much more in interest payments over time.

If anyone has any further ideas on this please let me know.

Thrugelmir

As you'll only repay £9,400. After losing 6% in fees.

The cost to you simplistically is 1.32%.

KFT

Yes you are correct, thank you for highlighting this point. So in the long run the penalty is minimal in comparison to the overall amount of interest I would pay on the mortgage.

I worked out if I were to overpay by £10,000 which will be reduced to £9400. I would make a interest saving of £11,900 over the whole term of the mortgage.

Thrugelmir

Certainly worth making the most of the 5% per annum allowance to overpay.

dimbo61

Can you ask them to reduce the term ?
You are in the middle of a fixed rate deal YES but when does the mortgage finish?
I asked for our term to be reduced from 22 years down to 10 years and this cost me £50(fee) with our lender.
I was then overpaying by £500 each month with no ERC,s to pay
Just an Idea so give them a call and ask