Overpayment rules...

ptkloon

Hi guys,
I have a mortgage which I've been overpaying for a while, previously had 2 sub accounts and have managed to pay one of them off.
I called up to increase my overpayments from £170 per month to £400 per month in an attempt to become mortgage free quicker. This was done quite simply over the phone. I then had a thought that instead of reducing the term by overpaying, they might reduce my future monthly payments and leave the mortgage term unchanged.

Once I got through to an advisor she said that the regular overpayments were not allowed to reduce the term unless I spoke to a qualified mortgage advisor first, I explained that I had been overpaying for several years and managed to knock 4 years off my mortgage so far - she said this is now no longer possible.

Can anyone clear this up for me? Would I be better saving my £400 per month then making yearly lump sum overpayments? I like to check my online statement every few months and see how long left I have.

Gizmo247

Unless your mortgage has a very low interest rate or you have restrictions on the amount of overpayments, it is normally best to make overpayments into the mortgage account ASAP to get the benefit ASAP. Don't fret about changing the term as the term is only the deadline at which the mortgage must be repaid.

ptkloon

Thanks for the reply, so if I overpay as normal then the time i have left on my mortgage will reduce?

juststuff123

Yes it will reduce, it just might not say that on your account. Better check though that your optional overpayments aren't reducing the amount that you have to pay as your regular mandatory payment, though if you have no ERCs you can just increase your optional overpayments to compensate. Sorry if that's not very clear?!

ptkloon

juststuff123 wrote: »

Yes it will reduce, it just might not say that on your account. Better check though that your optional overpayments aren't reducing the amount that you have to pay as your regular mandatory payment, though if you have no ERCs you can just increase your optional overpayments to compensate. Sorry if that's not very clear?!

Thanks,
I have no ERC and am on the standard variable rate at the moment (2% above base).

Currently have approx £79,000 to pay off, my minimum payment is £735.76 but I have upped it to £1135.76. I am hoping to pay off my mortgage in as little time as possible.

I have 10 years and 6 months left, my original term has 14 years and 9 months so I have already knocked over 4 years from it. This was with regular overpayments (approx £170 a month) and a couple of lump sums.

I was hoping to do this in as little as 5 years. Does anyone think this is possible? How much would I have to over pay per month to achieve this?

edinburgher

Why not have a play with the MSE Overpayments Calculator? :beer: