overpaying more than 10% a year

want2bmortgage3

a lot of lenders have this limit, but i was wondering, could you put your overpayments in a savings account and wait until you can re-mortgage (once your fixed deal is up) then make a lump sum payment in between mortgages?

for example your mortgage is 100k, you save 20k in 2 years, could you then re-mortgage for 80k and pay off 20k to the old lender.

betmunch

yes you can.

in your scenario you are paying off the whole amount to the old lender using £20k savings and a new mortgage for £80k from a new lender

getmore4less

want2bmortgage3 wrote: »

a lot of lenders have this limit, but i was wondering, could you put your overpayments in a savings account and wait until you can re-mortgage (once your fixed deal is up) then make a lump sum payment in between mortgages?

for example your mortgage is 100k, you save 20k in 2 years, could you then re-mortgage for 80k and pay off 20k to the old lender.

Usualy the limits are only penalty free limits you can overpay more for are fee.

Penatlies on larger overpayments usualy stop at the end of the promotional rates so you can just overpay without penalty no need to remortgage.

holly_hobby

Or look at an offset arrangement.

H

dimbo61

Or read the paperwork carefully !!!
Can you reduce the term ? Many lenders allow you to reduce the term for a small fee?
We reduced our mortgage term from 22 years down to 10 years and it cost us £50.
We have paid this new higher mortgage payment every month for over 6.5 years and saved about £60,000 in interest payments.
So read the paperwork or contact your lenders mortgage centre

Morgage_Confused

Can I ask if you actually benefited from a term reduction?
Could you not have achieved the same just by overpaying?

thanks

DVardysShadow

Morgage_Confused wrote: »

Can I ask if you actually benefited from a term reduction?
Could you not have achieved the same just by overpaying?

thanks

They are the same thing. Reducing the term increases the payments required. Overpaying reduces the term.

Morgage_Confused

But thats my point....why anyone actually requests a term reduction baffles me.

DVardysShadow

Morgage_Confused wrote: »

But thats my point....why anyone actually requests a term reduction baffles me.

A term reduction could depending on lender, provide a neat way of circumventing ERC's

dimbo61

My mortgage payments went from £750 a month to £1250 a month just a little bit more than the 10% I would have been allowed had we kept the original mortgage term!!
You should only do this if you are sure you can afford the higher payment each and every month.
I also had an offset mortgage so had savings in the offset account to cover the extra every month

want2bmortgage3

when i phoned barclays it was confirmed that my overpayments had knocked the balance down, but my monthly payment had remained the same, effectively reducing the term.

however i requested that my payments be reduced and my term stay the same. the idea of my overpayments was to save interest and see a snowball effect, so i like the idea of seeing my payment each month coming down, and being able to overpay more as time goes on.

as the other poster said you can keep payments the same and have effectively do the same, however by having the lowering monthly payments it means if i get into any trouble and can't overpay, then i have less to pay and haven't commited to a higher payment.