When remortgaging can you add a lump sum of money to the pot?

scottyka

Hi,
We're coming to the end of a 4 yr fixed rate mortgage at 3.99% and are planning to remortgage. We always overpay up to the limit, and also have additional cash we'd like to add to the mortgage pot. So my questions are:
1. When remortgaging can you add a lump sum to the pot, thus decreasing the amount owed? And how/when do you do this?
2. Also can you reduce the length of the mortgage in order to increase the monthly payments, and thus pay it off earlier? If things change and you need to increase the length by a couple of years later (say 4 years time) is it possible to increase the term?

Sorry, they're probably really silly questions but I can't seem to find an answer in the literature.
Thanks!

Mortgage_Mark_2

1. Yes
2. Yes.

Assuming there is no ERC overhang (early repayment charge beyond the end of your fixed rate period) then you can overpay by as much as you want once you're on the lenders SVR, and when looking to remortgage you are in effect taking out a whole new mortgage in the same way as buying a new house, and so can specify the term of that mortgage to suit your circumstances.

dimbo61

" 2. Also can you reduce the length of the mortgage in order to increase the monthly payments, and thus pay it off earlier? If things change and you need to increase the length by a couple of years later (say 4 years time) is it possible to increase the term? "

You need to be careful here! If you commit to a bigger payment each month and for some reason struggle to pay each month you could end up damaging you credit score!
Better to overpay each month.
Now we took out a mortgage over a normal term and then reduced the term by half with the option to increase the term IF we needed too.
Cost us £50 to reduce the term but saved thousands in Interest

scottyka

OK, thanks both of you.
By dropping to a lower interest rate we'd have much lower payments and can easily pay more (we're not anywhere near the edge and took out a 15 yr mortgage 4 yrs ago). So I'm really talking about keeping payments at the current level. If interest rates went up to 8% we'd still be ok but might like the flexibility to have a couple of extra years added on. You see, we already max out our annual overpayment. I like the idea of taking a normal term and reducing it though...

Thrugelmir

scottyka wrote: »

2. Also can you reduce the length of the mortgage in order to increase the monthly payments, and thus pay it off earlier? If things change and you need to increase the length by a couple of years later (say 4 years time) is it possible to increase the term?

You are better off overpaying than committing to a shortened term. As lengthening the term again is a contractual change. Which leaves you at the mercy of the lender should your circumstances have of changed.

Interest rates will rise in the years ahead, that's a certainty. So don't base financial decisions on the current abnormally low rates.