Mortgage overpayment has not recuced my payments

tonygilmore

Since I took out a new mortgage nearly 2 years ago I have been overpaying by £100 each month by standing order. I thought my monthly payments would reduce. either a small amount each or a learge amount annually - but this has not happened.

I having a meeting with my lender on Wednesday - any advice?

ddavis

I don't think all companies alter payments to reflect overpayment..

If I overpayed i wouldn't want my payments to drop, i'd like to see the big chunk come off at the end.

lizzyb1812

When you make an overpayment you need to make it clear that you either want it to reduce your monthly payment or reduce the balance of what you owe on your mortgage.

It looks as though your building society/bank has reduced your balance, not your payments, and this is in fact what most people seeking to overpay their mortgage are trying to do - by paying off part of the balance your reduce the term - the number of months you need to pay in total. This has the effect of reducing the overall amount of interest you pay as well.

However, you may want to reduce your monthly financial outlay - you should therefore ask the BS to reduce the monthly payment after an overpayment.

It may be out of your hands - it depends on the terms of your mortgage. You should discuss this with your BS. The worst possible outcome is that the BS don't know how to apply the overpayment because you have not informed them and are holding your overpayments separately, doing you no good at all!

HTH

lizzyb

tonygilmore

In the end i suppose i want to pay less overall. I will probably re-mortgage or seek a new deal in 12 months, when my tie in period ends - so reducing the balance is the best bet.

My dilema is this. If i reduce my monthly payments I can increase my overpayment - also my mortgage protection is based on my monthly payments - if my monthly payments go down so will my mortgage protection

lizzyb1812

As regards your PPI, have a look at the other threads on here about that and check that it will pay out if you needed it to - some people have been paying for PPI and have then been told their circumstances meant they would never qualify for a pay out.

lizzyb

ossie1_2

Is your mortgage a flexible deal, as you are tied in on penalties for a further 12 months? if not, overpayments if applied to your mortgage as a capital repayment could incur a penalty charge if within the tie in period. if it is a flexible deal then this shouldnt be a problem.

If overpayments are allowed and no penalties are charged, then request the lender to apply them to your account to reduce your monthly payments if this is what you want, as this is fairly simple to do.

Before your meeting, check your mortgage offer when you received it originally to see what it states about overpayments and how the lender treats them