First Direct Mortgage Overpayments then withdraw at a later stage

Pedent

From_St_Neots wrote: »

As Pendent says, have you considered an offset mortgage? Although I am confused by the overpayment comment. I thought offset was you held money in a savings account linked to the mortgage.

I have three accounts: a current account, a savings account, and a mortgage account. All three are linked, and I can move money between them freely.

wronlaster

As there are three stages like
1)Mortage acc
2)Current account
3)Savings Acc
you can with draw the two stages as well .

Goldiegirl

stylus360 wrote: »

Why ?

I do this on my Nationwide mortgage (they have now stopped the facility on all mortgages to borrow back overpayments)

If the % rate is higher then any interest rate you can get then it makes sense.

Unless a mortgage is designed to pay overpayments in and draw them back down again, it creates more work for the bank.

When I was working for a lender, historically we did pay back any money that the customer was in advance, if asked.

But, because the mortgage wasn't designed for this purpose, it was a very manual task, which involved drawing a cheque and typing out a covering letter. There was no system letter for this, as the system wasn't set up for this sort of activity.

This action wasn't encouraged, and if we saw that the customer was making a habit of this, the request would be politely declined. As an alternative we'd suggest that they didn't pay their monthly payment until the advances were cleared. But even that course of action was fraught with problems. There was the risk that the system would 'wipe' any advances at the year end, which would create an arrears situation when the next payment was missed, or the customer would forget to set up the direct debit to restart payments again, causing arrears.

So the answer to 'why', is because it's a PITA to bank and customer.

stylus360

I am looking to remortgage to FD primarily for this 'draw back' or taking your savings out.

Are there any limits on amount or penalties ?

Thrugelmir

sebtomato wrote: »

Not sure that's necessarily the case.

I am with First Direct, and got my offset mortgage two years ago for a £99 fee and a tracker rate of 2.49% (1.99%+BR).

If people want the flexibility to overpay and then withdraw the money, then an offset mortgage is the solution.

Any borrower fortunate enough to meet the lending criteria of HSBC in the past few years will have benefited from a very competitive interest rate. Unfortunately many borrowers don't clear the bar on application.

Caladan

andybirch wrote: »

Hi, thanks for the replies.

I guess I was wanting too much, asking for a financial product which actually benefitted the customer.

Happy tarting.

You mean like helping you buy your house by lending you a shed-load of money at a highly competitive interest rate?

Comments like this are why us customer service reps become jaded, stop giving a damn and start just following procedures to the letter instead of going above and beyond for people.

Think about it from the other parties viewpoint:

Your circumstances may change between when you purchase the house and require the additional funds for the improvements, therefore the risk and suitability of the product may also have changed.

It's sensible to re-assess the request at the time you need it as it protects you from over-extending your finances (and I'm not saying that's what would happen to you, but it does happen to people all the time) and protects the lender from irresponsible lending claims.

Remember - Your circumstances may be clear to you, but lenders have hundreds of years experience and track records to fall back on (history sometimes forgotten, don't get me wrong)

That's not to say products like you've mentioned don't exist, there must be some left on the market, but I suspect they're few and far between, maybe one of the brokers on here can clarify that.

Word of warning - Assuming First Direct has the same criteria as HSBC (generally very similar) if you want to borrow further funds after the purchase the maximum loan to value including the new loan is 80%, take this into consideration before you make your decision.

Kind regards,
Cal

Caladan

stylus360 wrote: »

I am looking to remortgage to FD primarily for this 'draw back' or taking your savings out.

Are there any limits on amount or penalties ?

You'll need to meet the criteria for an off-set Mortgage. I don't know what it is but as off-sets are on Interest Only terms I imagine they'll be quite strict.

Edit: Just found this on the site as well - "Sole applicants must have a minimum salary of £50,000. Joint applicants must either have a minimum combined salary of £75,000, or one party have an individual salary of £50,000 or more."

Edit No. 2: Forgot to answer your question - There are no limits or penalties as the money is just held in an instant access savings account. There are penalties if you repay the actual Mortgage in full during any fixed/discounted period (not relevant if you're on a lifetime tracker).

Rather than pay the money off your Mortgage, you'd just pay it into your savings account and from that day onwards no longer pay interest on that amount of the Mortgage balance.

Just found this video, might help you make your decision.
http://mortgages.firstdirect.com/mortgage-rates/product/2-year-fixed-offset--standard~19#offsetVideo

Kind regards,
Cal

jamesd

stylus360 wrote: »

I am looking to remortgage to FD primarily for this 'draw back' or taking your savings out. ... Are there any limits on amount or penalties ?

For one of their offset accounts you can draw out again up to your initial agreed mortgage amount. But it's safer to use the offset savings account instead for the reason I explain below.

andybirch wrote: »

initially did think i'd be able to offset my savings account, but was told this was not possible. Also I didn't meet the stricter criteria in place for FD offset mortgages.

If you had met the criteria you'd be able to have an offset savings account as well as the offset current account with overdraft facility charged at mortgage interest rate, secured with the mortgage.

In addition it would be possible to pay into the mortgage account and withdraw from it. However, if they disliked something that you did with the current account they would:

1. Give you 30 days notice of closure of both the offset savings and current accounts.
2. Ban withdrawing money from the mortgage account, leaving whatever you have there trapped.
3. Leaving you with a standard interest only mortgage but still paying the higher interest rate for a mortgage that no longer has the offset, overpay/withdraw or porting features that you're still paying for in a higher interest rate.

They cannot in that situation prevent withdrawing money from the offset saving account, unless they have grounds to suspect criminal activity, so it's better to pay money into that account rather than into the mortgage account in most circumstances. Possibly not for those who might rely on means tested benefits.

The something they didn't like could be anything from business use on a personal account to having gambling transactions or more transactions than they like or some foreign exchange transactions or even some types of investment transactions. Not just illegal things - it can be things that are both completely legal and fully compliant with the published account terms and conditions. The mortgage contract term that allows this seems not to meet the FCA's requirements for it to be a fair term but that's still not a situation you want to end up being in.

andybirch wrote: »

I guess I was wanting too much, asking for a financial product which actually benefitted the customer.

So long as you don't get the security folks unhappy the offset product can be quite nice.

andybirch wrote: »

My only option now is to try and maximise the rate I can get through a savings account and remember to move it around when the rate drops.

You could try another lender. First Direct have some of the strictest criteria around. Getting accepted for anything by FD implies that you'd have a good chance of being accepted elsewhere.

xtra_time

Caladan wrote: »

Edit: Just found this on the site as well - "Sole applicants must have a minimum salary of £50,000. Joint applicants must either have a minimum combined salary of £75,000, or one party have an individual salary of £50,000 or more."
l

WOW I was thinking of getting one of these but that's a high wage as a minimum