Mortgage Overpayment Advise\Help

pw2374

Hello All,

I apologise for what I'm sure is going to end up being a bit of a simple question - but new to the whole mortgage thing and it's surprising how it's not quite as straight forward as I thought (in terms of transparent clear information being available).

I have a tracker mortgage with Woolwich - taken out this month (December 2011) for £60,000 capital amount over 25 years. Based on current interest rates, assuming I stick to the minimum repayment amount: I would repay a total of £84,641.77 (£24,641.77 interest on the £60k).


My mortgage provider allows me to make overpayments by 10% per year without incurring a penalty - but no where in the literature does it specify what this 10% is of?


Is it the £60,000 capital amount? Meaning in Year 1 (before any payments) I could overpay by £6000? If it I was to divide this monthly, this would be £500 per month extra I could overpay by?



But how does this work after the first payment is made? If my first payment reduced the capital amount even by a penny, would it mean in month 2 that that if I were to pay £500 over again, I would be 1p over the 10% because it's now 10% of the lowered capital amount (which is no longer £60k)?


Sorry, I'm just totally confused by how it works. I really want to make overpayments but don't want to be caught out by charges for doing so.


Any advise \ help would be appreciated.


Thanks in advance.

originalmiscellany

I am pretty sure it will be 10% of the amount owed at that date - so ring them for exact details.

As for time frame, it will almost certainly mean a maximum of 10% payable in 12 calendar months, so if you make a 10% overpayment today, you wouldn't be able to overpay until 30/12/2013. Or as you say, if split evenly, you could probably pay a set amount every month, and then readjust that amount in 12 months time.

A trick to speed up the mortgage payment, it is best to keep your mortgage rates at the original rates, as it will make a huge difference to speeding up your mortgage.

If you're stuck, ring your bank and explain the situation with amounts, dates etc and check you're not going to get their goat for want of a better word.

InsertWittyName

You were right with your first assumption - it's 10% of the outstanding amount, so in your example it would be £6k of £60k.

Overpaying this at £500 per month would be sufficient to stay within the overpaying limits.

madeupname1

I agree with OM - check with the lender, because the 10% is calculated in different ways by different lenders. My current lender allows me to pay up to 10% of whatever the outstanding balance is as of 31 March so say the outstanding mortgage is £100,000 at 31 March I can pay £10,000. I can pay that amount in one go or in as many instalments as I like. The mortgage I was looking at with Santandar allows 10% of whatever your outanding balance is as 1 January. I think another lender only allowed OPs of up to 10% of whatever the monthly payment is. So best thing is to check with your lender.

Thrugelmir

If you can comfortably afford higher repayments, then there's always the option of shortening the mortgage term.

pawlala

With C&G they allow 10% OP within the calendar year. Since they send an annual statement to 31.12 your limit is 10% of the balance on the statement summary. So effectively this means that (as in my case) I paid 10% of 2010-11 in December 2011 and 10% of 2011-12 the month after!