Post Office Mortgage - Be Careful!

attila_

We just completed a post office mortgage and now passed onto the hands of a bank of Ireland UK. Post office have no involvement now.

So we have a fixed term 3.2% for 5 years and allowed to make up to 10% of capital amount in overpayments per year...great just like other banks.

The problem started when we made a large overpayment then received a letter from them saying they had adjusted all future monthly payments to lower amounts.

It turns out that Bank of Ireland do NOT ALLOW reduction in term length by overpayment. This is a big problem, as it means overpayments will not help you reduce the amount of interest you pay over the term length. It simply means you shift the amount you pay earlier rather than later. Basically a total waste of time if you are in a fixed term.

Now if you don't make overpayments the ignore this and don't worry but if you do this is something they hide very well.

Post Office told us it would reduce term length very explicitly as this was something we wanted.

Thrugelmir

attila_ wrote: »

It turns out that Bank of Ireland do NOT ALLOW reduction in term length by overpayment.

Fully understandable as this a change in contractual term. Not just a simple question of reducing the term by the lender.

Before I pass any further comment. Is there a cap on overpayments that can be made ?

attila_

I'm surprised as my previous lender did this. Was in a 4 year fixed term but reduced the mortgage length if an overpayment was made....

For example if I made an overpayment which was equivalent to 1 month on a 25 year mortgage. The mortgage would reduce by an additional month from the 25 year...seemed pretty straight forward to me.

I'm not looking to reduce my deal. This is a standard thing

Thrugelmir

attila_ wrote: »

I'm surprised as my previous lender did this. Was in a 4 year fixed term but reduced the mortgage length if an overpayment was made....

Lenders will operate their own policies. To reduce the contractual term would normally involve the payment of a fee. To cover the administration cost of the process.

If you can continue to make overpayments then by default the term will be shortening of it's own accord. As you'll end up repaying the mortgage balance sooner. So automatic adjustment of the term isn't overly critical.

attila_

Thrugelmir wrote: »

Lenders will operate their own policies. To reduce the contractual term would normally involve the payment of a fee. To cover the administration cost of the process.



If you can continue to make overpayments then by default the term will be shortening of it's own accord. As you'll end up repaying the mortgage balance sooner. So automatic adjustment of the term isn't overly critical.

The contractual term is the period of fixed rate in my case though isn't it?

This is the problem. If you make an overpayment with Bank of Iteland they simply adjust the remaining repayments lower to match the same number of payments. The problem here is your capital that you are repaying early is less effective.

mikeyscott

I had a lender 6 years ago when I did an overpayment they reduced the monthly amount. Wasn't happy.

I'm going for a Post Office at the moment. Only overpayment terms I know off thus far is min £500 p/m and max 10% overpayment

attila_

mikeyscott wrote: »

I had a lender 6 years ago when I did an overpayment they reduced the monthly amount. Wasn't happy.

I'm going for a Post Office at the moment. Only overpayment terms I know off thus far is min £500 p/m and max 10% overpayment

Check with them when you speak to them next. I just wish I got it in writing from post office.

kingstreet

Post Office is just a marketing brand.

Anyone considering a Post Office mortgage should research Bank Of Ireland, as that is the lender and administrator.

amnblog

You can of course pick up your stamp and your Euros at the same time, so it is not all bad.

Bank of Ireland, lender whose reputation is so poor it can be enhanced by marketing under The Post Office

Zoology_Dragon

Oh dear, one of the things we liked about the PO was the ability to overpay. I think we're going to have to find out if it will reduce our monthly payments, seems a bit pointless if that's what will happen.Saying that though surely it will still lower the total owed on the mortgage?

mikeyscott

Thinking about it Post Office branding with Bank of Ireland admin, couldn't think of anything worse.

Oh well, if the rate is good and I don't need to contact them, then fingers crossed. I'll put the question to L&C re overpaying.

Just wish I could have stayed with HSBC. I may well be as I've heard BOI/PO are viscous with their valuations.

I'll be saving up in £500 lumps for over payments, plus funding for the R32