Halifax Overpayment - Won't Reduce Term

garethbrock

Hi all,
I purchased a house for 90k in Dec 2012 and put down a 15% deposit. Halifax gave me a mortgage for the rest at 4.64% (two year fix) over 30 years. Done on my income only - mrs income varies too much and has some old CCJS hanging around her file - all paid and closed now. I earn about £28k with over £4k in mileage each year from work.

I wanted to start overpaying as I wanted a better LTV when I came to renew the mortgage. I got married last June and this February/March I made a payment to my mortgage account of just over £7k (This was the maximum 10% allowed). I contacted Halifax and told them that I wanted the overpayments to come off my term and not reduce my monthly payments. They said fine, my term was now (I think form memory) 24 years. My monthly payments have been the same since so was happy that all was set up ok.

I'm starting to think about which deal I want now. I can exit my existing deal 3 months early as long as I'm going to another Halifax product. So I want to reduce the term to keep my payments at about the £400 mark as that is what I am used to paying. And any additional overpayments can be an overpayment to the account.

Appointment booked with Halifax Mortgage Adviser for 1st September. She advised me that as I was reducing the term I would need to go in for a full assessment. As I have some debt £12k on 0% credit cards (from wedding) I am worried that I might fail due to the MMR.

So I called up Halifax, they told me my term was 28 years 5 months. I said that couldn't be correct as my online account showed the same term - online account does not take into account any overpayments.

I was transferred around and finally someone confirmed that the money was on my account but was not allocated. So the term was the same. The term has not been reduced as I had asked. I was told not to worry and that I was not paying interest on this overpayment amount and that due to MMR they could not review/reduce the mortgage term as that would need a whole new assessment.

I pointed out that I made the overpayment before MMR rules came in and I was not told this when I called. Halifax have no record of my earlier conversation on record when they quoted me the new term.

I have been told that to reduce the term I need to be reassessed under MMR. So I asked if it would be recalculated if I let my mortgage roll onto the HHVR at the end of my two year fix. Answer no.

I have been following the MMR threads on here with some interest. Reading around Halifax are going off on one and not doing the same as other lenders. The FCA (links I have read on here) state that over transition time if borrowers are not asking for more money or increasing the term then the rules don't apply? Is that correct?

Can I complain about being mislead end when making the overpayments. Can they ignore my overpayment wishes and hold it they way they have despite MMR not being active when payments were made. Will I get a better LTV rate if I don't go for a reassessment. And lastly will my personal debt be a barrier to me gaining another mortgage. I'm worried Halifax will say no and stick me on there variable HHVR at 3.99% when I'm looking at a 2.89.

Very sorry for such a long post - wanted to get the info right first time. Thoughts/experiences/advice welcome.

G

Thrugelmir

By making overpayments and not reducing your monthly payments your mortgage will be paid off quicker than the contractual term.
So you haven't been mislead.

Lenders will use any change of contractual terms to review their customers finances. Hardly surprising since they cannot enforce a review otherwise.

kingstreet

garethbrock wrote: »

Reading around Halifax are going off on one and not doing the same as other lenders. The FCA (links I have read on here) state that over transition time if borrowers are not asking for more money or increasing the term then the rules don't apply? Is that correct?

The transitional rules say lenders MAY dispense with the affordability calculations when offering a customer retention product where there's no change in the borrowing.

However, that is at the lender's discretion.

However, in your case, reducing the term will increase the contractual monthly payment, so it falls out of the transitional arrangements anyway.

It's too soon to know how these things will end up once they settle down. We're only two months in.

Tillytwopaws

You may well be able to do an online product transfer but all that would enable you to do is change your interest rate. You would be offered the rates you are entitled to as per your LTV and you would select the product you want. It's an execution only service. You could take the rate you want and then top up your payments to the £400 mark afterwards.

An overpayment made now of over £1000 would reduce your term - unless they've had another recent policy change. How you would go with a complaint....not really sure!

You could look to reduce your term now but it would be based on affordability and as such you would need to go through the review process and have all details of your credit commitments to hand. If after the review there is not a product that would meets your needs and circumstances the you would revert to HHVR at the end of your current product.

Goldiegirl

If you continue to pay over the contractual monthly payment, the mortgage debt will reduce quicker, and ultimately would be paid off before the end 28 years and 6 months.


Personally, I never quite understand the rush to want to reduce the contractual term of the mortgage.


As long as the terms of the mortgage allow you to make the overpayments that you want, the contractual term doesn't really matter .


If the mortgage is paid off before 28 years 6 months, they'd close the mortgage at that point - they wouldn't force you to keep the account open until the end of the contractual term.


Also, by keeping the original term of the mortgage, you would always have to option of reverting to the contractual monthly payment, if you had a period of time with cash flow problems

Morgage_Confused

Do NOT reduce the term....just leave it alone....
By overpaying the term will be reducing anyway just its not being contractually lowered.
The guy on the phone has totally confused a simple situation.
Just switch to the best product they have. When this is done you can just up your payments to your favoured £400 anyway. They may tell you the term is still 28 years, but if you continue to overpay the mortgage will be payed off before then anyway.

Yorkie1

You may be confusing the difference between a contractual reduction of the term, and the natural reduction by overpaying.

If you formally agree the contractual reduction then you're committed to it and must abide by it, whereas just overpaying retains the initial length of product and thus some flexibility in the future if you need it (e.g. if circumstances change for the worse) - you have less owing but over the same longer term and thus pay less monthly.

Formal contractual reduction brings MMR into play, natural reduction doesn't.

garethbrock

Hi Yorkie1 and mortgage confused, that makes sense.

I'm going to switch my product and leave the term alone. I will then overpay by £100 per month and keep well away from the MMR assessment for now. I don't like the idea of the bank saying computer says no and then sticking me on the higher HHVR. Thanks for the input.

Yorkie1

Sounds like a plan.