Britannia Overpayment - confused

Morgage_Confused

Dont worry about the term, just leave it be. Just keep the monthly payments the same. By far the best option.(the term will reduce by itself)

ACG

Imma_Number wrote: »

Term stays the same so the contractual payment reduces but you keep paying the same higher amount. Balance reaches zero before the contractual term. Tada. Mortgage paid off *before* the term.

That's it. It's not as if you keep paying after the balance has reduced to zero.

Sorry I misunderstood your previous post.

aj9648

hi

So I paid my overpayment today of 10% (about £11k). I am also thinking about paying another £10K in, but would be hit by some charges - about 4% (so £400 ish)

But I am assuming correctly that paying the extra £10K would be beneficial in terms of reducing interest charges etc over taking the pain of the repayment charge.

Any suggestions?

JimmyTheWig

Imma_Number wrote: »

Term stays the same so the contractual payment reduces but you keep paying the same higher amount. Balance reaches zero before the contractual term. Tada. Mortgage paid off *before* the term.

But presumably then these monthly repayments would represent further overpayments.
If the OP had paid the maximum allowed in the year than this wouldn't be possible without penalty.

anselld

aj9648 wrote: »

hi

So I paid my overpayment today of 10% (about £11k). I am also thinking about paying another £10K in, but would be hit by some charges - about 4% (so £400 ish)

But I am assuming correctly that paying the extra £10K would be beneficial in terms of reducing interest charges etc over taking the pain of the repayment charge.

Any suggestions?

Unlikely to be sensible unless you are on a stupidly high mortgage rate. Better to put the 10k in savings until the next time you can overpay without charge.

JimmyTheWig

aj9648 wrote: »

I am also thinking about paying another £10K in, but would be hit by some charges - about 4% (so £400 ish)

But I am assuming correctly that paying the extra £10K would be beneficial in terms of reducing interest charges etc over taking the pain of the repayment charge.

It depends on your mortgage interest rate and what (net) interest you can get on your savings.
You say that the mortgage will be penalty free in May 2018, so three and a bit years away.
Split the 4% penalty across those years and it is like paying 1.2% a year.

So if your mortgage interest exceeds your savings interest by more than 1.2% then it is worth paying it off the mortgage and paying the penalty.
E.g. say you can get 2.0% net interest on your savings.
If your mortgage interest rate is 3.0% then this isn't more than 1.2% more than your savings so not worth paying the penalty.
But if your mortgage interest rate is 3.5% then it is worth paying off the mortgage and paying the penalty.

ViolaLass

JimmyTheWig wrote: »

But presumably then these monthly repayments would represent further overpayments.
If the OP had paid the maximum allowed in the year than this wouldn't be possible without penalty.

Not if the bank has agreed that payments may stay the same.

Nationwide gave us the same option when we overpaid - we could leave the term and payment the same and they would be recalculated at the end of the fix (in about 3 years). Interest saved but flexibility also retained.

JimmyTheWig

ViolaLass wrote: »

Not if the bank has agreed that payments may stay the same.

Nationwide gave us the same option when we overpaid - we could leave the term and payment the same and they would be recalculated at the end of the fix (in about 3 years). Interest saved but flexibility also retained.

But had you paid the maximum overpayment allowed in the year?

If the term stays the same and the payments stay the same I don't understand how the difference can be anything other than an overpayment. But I guess it could be a loophole...

ViolaLass

JimmyTheWig wrote: »

But had you paid the maximum overpayment allowed in the year?

If the term stays the same and the payments stay the same I don't understand how the difference can be anything other than an overpayment. But I guess it could be a loophole...

Yes, we had made the maximum overpayment for that year. I see your point but as long as the bank allows it (and Nationwide overtly do) then there's no problem, is there? I think the idea is that if we wanted to withdraw the overpayment, it would be easier as the term wouldn't have to be re-extended (with the accompanying palaver).

Given that they didn't want to charge us for changing the term length, it's presumably much of a muchness to them anyway.

JimmyTheWig

ViolaLass wrote: »

Yes, we had made the maximum overpayment for that year. I see your point but as long as the bank allows it (and Nationwide overtly do) then there's no problem, is there?

No, no problem. And probably the best outcome for you, so that's good.

I thought it may have explained why the OP was not offered this option, however.