Mortgage Overpayments

Steve_Hearn

Has anyone else noticed how banks are not adjusting monthly repayments on Variable Rate Mortgages after you make an additional/extra payment? I bank with HSBC and thought it was just me, but talking to friends/colleagues, others have experienced the same. Seems instead of lowering our payments, they're keeping them artificially high to protect themselves?? And how much money would be freed for other uses if payments were adjusted......as they should be???

Calfuray

What?

If you are saying what I think you're saying:

When you make an overpayment, you can either use that amount to reduce the monthly repayments you make but keep the same term, or pay the same monthly, and reduce the length of the mortgage. If your mortgage company is not doing the one you want, you just need to phone them and let them know.

Steve_Hearn

.....have been making regular overpayments of between £50 and £150 per month, previously the monthly payment was adjusted downwards as a result (keeping length of term the same) however, seems now that they're taking the over payment, but not adjusting repayment rate, and having just had an annual statement, shows the finish date to be as per the original agreement, which clearly will be early if I continue?
Thus, seems they're arbitrarily taking the decision to keep monthly payment higher than they need to be, and not allowing me or others the freedom to use those additional funds freed for alternative uses if we desire?

Calfuray

It could be that they have a scheme of 'overpayment reserves' where they hold these until you let them know if you want them to be applied to mortgage, and in which way.

Don't want this to come across as mean - but I don't really know why you are posting as above without phoning them first to find out what is happening? I'm sure it's a misunderstanding that can be resolved with one phone call.

marlasinger

I think you need to ring them and ask for it to be applied as a capital repayment.

I know Woolwich don't recalculate payments (unless it's above a certain amount) if you have been overpaying, until the end of their year, unless you specifically ask them to.

ADChick

I'm overpaying mine with nationwide. They don't do anything unless you overpay by £500 or more, and which point you can choose what you want them to do.

As I'm not paying that much, mine just comes straight off the capital. So then I pay the same repayment each month, but a very small amount is saved on interest and comes off the capital as well.

When my fixed term is up, then they look at rejigging it all depending on what I want.

VoucherMan

I asked at the Halifax when I started making overpayments.

I was told that they only recalculate when there's an interest rate change (unless you specifically ask them to)

This fits as they've only done it twice for me. Once when the base rate dropped to 0.5% and again when the Halifax upped their SVR to 3.99%.

ViolaLass

Steve_Hearn wrote: »

Thus, seems they're arbitrarily taking the decision to keep monthly payment higher than they need to be, and not allowing me or others the freedom to use those additional funds freed for alternative uses if we desire?

Are they forcing you to overpay? If not, then you're free to stop doing so if you want to have that money for 'alternative uses'. I think you're being a drama queen - as others have said, call the bank and ask them what the policy is and what your options are.

VoucherMan

Also if you read some of the replies to this you'll find you're trying to convince the wrong people.

pawlala

C&G don't recalculate monthly repayments unless a capital repayment of at least £1000 is applied. I don't know what it is for other lenders.

jimmybrid

I thought the whole point of making overpayments was to reduce the mortgage term? Surely the best way to do that is to keep paying the same amount each month, irrespective of your overpayments. Whether the bank reduce your mortgage term or not now, you will effectively reduce the term anyway.