TRAPPED overpaying on mortgage

lemoncurd76_2

Hi All,
We have been overpaying on our Santander mortgage for 3-4 years now and have reduced the term down from 18 years (what would have been remaining) to 8 years. Our repayments are £2000 per month. This is the level we chose based on what we could afford. At the time I was told if our circumstance changed, we could immediately change back to the original term and so pay less again every month.


Now, for various reasons, our circumstances have changed and we need to do this to pay less. But, it seems that the new mortgage rules that have changed in the last 3 weeks means we have to formally apply to pay less. We have to give banks statements, company accounts, go through the 2 hour interview with the bank etc etc for them to establish if we can afford to pay less than half the amount we pay now.


Surely this cant be right and doesn't make any sense! What if they turn round and say we can't afford to less. Are we stuck then paying £2000 a month for the next 8 years??? Which we can't afford to do!


Any advice would be welcome,
Thanks.

kingstreet

You are very much a guinea pig with something like this.

I don't think the MMR rules were ever designed to restrict people returning to their contractually agreed payment following overpayments, but that is how some lenders are choosing to interpret them.

Thrugelmir

Did you change the contractual term and simply not make overpayments?

getmore4less

kingstreet wrote: »

You are very much a guinea pig with something like this.

I don't think the MMR rules were ever designed to restrict people returning to their contractually agreed payment following overpayments, but that is how some lenders are choosing to interpret them.

It is a bit crazy but the lender puts themselves in a position where if they won't agree to the lower amount on afforability grounds they would be unreasonable to insist on the mortgage continuing at the higher rate which is even less affordable.

One of the options is to keep extending the term till it becomes affordable and hope it does not hit other barriers like age.


A good lesson for others, keep your term as long as possible and overpay(trying to avoid penalties) and only shorten if you have visibility of the income to meet the higher contractual payment.


(not read the relevent docs but there be a distinction between new lending and existing lending or did the idiot forget to cover that area?)

amnblog

wrote:

But, it seems that the new mortgage rules that have changed in the last 3 weeks means we have to formally apply to pay less. We have to give banks statements, company accounts, go through the 2 hour interview with the bank etc etc for them to establish if we can afford to pay less than half the amount we pay now.

.

Have Santander said this? Did you speak to someone who actually knows the policy or just the telesales person?

Did you ask them to check the policy and explain why it is necessary?

Ask them if they are really saying they may refuse you the right to pay your mortgage under the terms agreed in your original offer contract?

lemoncurd76_2

Yes Santander have said that we have to apply to extend the term of the mortgage to make the repayments more affordable. Any changes to the term, they have to do this to stick to these new rules. I have asked to just change it back to the original term which would be back to 18 years but still we have to go through the process. I never signed anything to make the initial change to the term (overpaying) it was all arranged on the phone and they say I verbally agreed so it would not stand up in a court of law. I did agree but they also told me I could change it back at any time (this was verbally agreed by them) but looks like they don't have to stand by their verbal agreement but I do!

kingstreet

If they do refuse, I would make a formal complaint and if you don't get a satisfactory outcome, escalate the complaint to FOS.

Surely, we should be encouraging people to overpay to reduce their mortgage debt, not putting barriers in their way when all they want is to go back to what they signed up to and on a reduced balance, at that?

tanith

I don't understand how you would go back to an 18yr term as you have been overpaying you will stay at whatever you've got the mortgage term down to now even if you reduce the payments or am I missing something here.

kingstreet

It's a question of contractual obligation, IMHO.

The mortgage was taken at £ X over Y years.

If you overpay, the mortgage term falls, but is that an alteration in the contractual obligation?

Some lenders seem to think it is, others don't.

I'm pretty sure the only reason you have to make a decision to accept a shortened term or a lower future monthly payment when you overpay, is due to lenders' creaky IT infrastructure and inability to cope with anything which provides a modicum of flexibility.

That and some lenders are just OTT about absolutely everything.

lemoncurd76_2

They have just phoned to say that they don't think we can afford to make payments of £875 per month so they are rejecting our application to extend the term and lower te payments. But they are quite happy for us to continue paying £2000 a month. I am so angry it just doesn't make sense!!??

lemoncurd76_2

You are right Kingstreet I am going to make a formal complaint. We can actually afford to keep overpaying but want to reduce monthly payments as we will be renting the property out for a while, so therefore doesn't really make sense to be paying a mortgage which is higher than the rental income.