How to make overpayments on TESCO mortgage?

Andy_WSM

As subject. I just changed to a TESCO mortgage, thread here: https://forums.moneysavingexpert.com/discussion/4722663

How do I go about overpaying the maximum 20% that I am allowed to without penalty?

Beckyy

Does it say anything in your documents from Tesco?

Andy_WSM

Beckyy wrote: »

Does it say anything in your documents from Tesco?

Only to contact them, which is always a kerfuffle, hence seeing if anyone has experience of it on here.

Calfuray

I had a look at their website, it says:

TESCO wrote:

MAKING OVERPAYMENTS▲
With a Tesco Bank Mortgage you can make lump sum or regular overpayments. Making overpayments means you'll reduce your mortgage balance and the amount of interest you'll have to pay.

What you should know about overpayments
You can use overpayments to reduce your regular monthly payment.
There's a limit to the total amount of overpayments you can make each year in the initial rate period. If you exceed this limit you'll need to pay an Early Repayment Charge. This is shown in your Mortgage Offer.
We calculate the maximum yearly amount you can overpay on the same date each year.
When the initial rate period ends, you can overpay as much as you want without any charges.
If you want to make regular overpayments, we can collect these by Direct Debit along with your normal monthly payment.
If you overpay by Direct Debit, there's no minimum amount. If you pay by cheque, the minimum payment is £1,000.

Doesn't help much. Looks like you need to phone to do regular DDs, not sure if you can do online transfers...

Andy_WSM

I might have just had a rethink anyway. Seeing as I am only paying Tesco 2.49% for 5 years and I can get 3% on savings I might make them wait for their money - it will make a nice change to turn this to my advantage after 20 odd years of struggle!

abouttimetoo

Hi Andy, welcome to the board

Congrats on the progress you have made so far, great stuff and looks a good rate from [EMAIL="T@sco"]T@sco[/EMAIL]. I know you have said contacting them is a kerfuffle but might just be worth it to establish definitively whether you could set up a standing order or make on-line payments.

That said, I can see that you are thinking of saving the money instead if you can get a better interest rate. I'm not sure what rate tax payer you are so bear that in mind too

I saw on your other thread that someone mentioned the [EMAIL="N@tionwide"]N@tionwide[/EMAIL] Flex to you at 5% for £2500 so that's good. Other ones you might want to look at are Lloyds Vantage and BoS Vantage, you get 3% on each (for £5k, different rates for tiered balances) and can have three accounts with each bank e.g. you could have £30k at 3%. You do need to pay in £1000 a month but this can be transferred in and out, use the same £1000 to cycle through them all and back out again or even smaller amounts in and out as long as it adds up to £1000

Another one to look at is the [EMAIL="H@lifax"]H@lifax[/EMAIL] Rewards, you do need to pay two D/D's out of it, pay £750 in a month (again you can transfer it in and out) and you get £5 pm

Lots of other good ideas to save or make money but I'll leave you with the above for now

PS, has anyone mentioned how addictive this gets

Good luck with your plans

Regards
ATT

Tilly_MFW_in_6_YRS

Hi Andy

It's worth checking out this calculator - you can then see, depending upon your tax levels what savings rate you need vs mortgage Ops.

http://www.moneysavingexpert.com/mortgages/savings-vs-mortgage-calculator#result

Good luck with your plans

Tilly

Andy_WSM

Tilly_MFW_in_6_YRS wrote: »

Hi Andy

It's worth checking out this calculator - you can then see, depending upon your tax levels what savings rate you need vs mortgage Ops.

http://www.moneysavingexpert.com/mortgages/savings-vs-mortgage-calculator#result

Good luck with your plans

Tilly

That's very useful! Thank you. Looks like I'll be paying off the maximum 20% over payment then and squirreling the rest away at a rate not too dissimilar to the mortgage rate for the end of the 5 year penalty term No "profit" to be made on the OP fund, but at least it won't devalue

druss_the_axeman

I've been doing this for years, it's really easy but yes you do have to phone them to arrange it.

They can do regular direct debits, or single lump sums, though the lump sum has to come from a card if you do it by phone, you can use the same debit card that is paying your existing DD's so that makes it easy. They did offer me the chance to do a BACS transfer but that's more hassle and since you can do it over the phone that's really simple.

The nicest thing is they work out how much you can overpay on the anniversary of the start of the mortgage, 20% of the balance then, so you can schedule overpayments to clear say 10% during the year and then, if you've got the cash, drop another 10% on the mortgage just before the anniversary date.

You do have to choose whether to decrease the interest you pay or decrease the term of the mortgage (always go for the term) it will save you more money in the long run.

Duncan

scd3scd4

Not really the answer to your question but if may help others.




I have always paid more each month over what my mortgage is. Some years more than others. Just depends how I am financially. Of course there are limits but I have been on a variable rate for a while. So have no maximum.


Use this sites over payment tool and see, even little over payment can take off months.........and then years.


All I did was phone my bank and ask them to increase my DD.