Anyone found reducing term means affordability check?

Bear_family

We have a 5 year fixed mortgage with Natwest that ends mid 2018. We can overpay by 10% each year, which we recently did for the first time this month. When I asked to reduce the term and keep our payments roughly the same, I was told they couldn't do that, as it would mean we would be effectively overpaying more than 10% in one year.

The only way around it would be to pay an admin fee of £35 and go through an affordability calculator with someone, send off bank statements to prove income etc and it all go through an underwriter. Does this sound right? Has anyone else had this?

I asked why when even if we reduced our term the monthly payments would still be slightly lower than we were paying before the overpayment was made and was just told that made no difference? I'm really annoyed about this, as with previous mortgages I could just overpay up to the 10% per year and the term was just adjusted if I said it was a capital overpayment.

Thanks for reading.

Thrugelmir

Bear_family wrote: »

The only way around it would be to pay an admin fee of £35 and go through an affordability calculator with someone, send off bank statements to prove income etc and it all go through an underwriter. Does this sound right? Has anyone else had this?

A change of term is a contractual change. To accord with current regulatory requirements lenders will therefore have to assess you again. Failure to do so would leave the lender in a no win situation should the switch prove to be unaffordable.

Thank the right to compensation era for the now over zealous nature of the lenders.

Bear_family

I understand what you are saying, but I can't believe that everyone who overpays on their mortgage has to go through this now.
Thanks for answering.

Thrugelmir

Bear_family wrote: »

I understand what you are saying, but I can't believe that everyone who overpays on their mortgage has to go through this now.
Thanks for answering.

If you wish to shorten the mortgage term then yes. Simply overpaying is a different matter.

Pete9501

Surely most folk who overpay change the length of the mortgage when they switch the deal next time around.

northerner999

The terms of your deal are what you agreed to, it's really irrelevant what you had in the past or what anyone says here if you have a legally binding contract. You took out a fixed-rate mortgage for security, so you have to abide by the rules.

Having said that, I don't understand why you are so annoyed. You can overpay by 10% still, and in mid 2018 you can pay as much as you want. Why don't you just do that? You're in a great position if you can overpay more than 10% in a year.

What you are asking from Natwest is to end your current deal and agree a new mortgage. If you do that and want a shorter term, you need to hand over payslips etc. Personally, I'm glad the banks are tighter on checking affordability as I didn't really enjoy it when the world's economy collapsed!

I recently remortgaged, having made a large lump sum payment after a fixed rate ended. Although I had no desire to reduce the term - I'd like to keep the minimum payment as low as possible while I sort out other financlal priorities - I was also told I'd need the affordability checks if I wanted to reduce the term. To be clear, this is only because you are effectively asking to remortgage.

As I said, if you can overpay then happy days. Do that, save the interest, and in mid 2018 when you come off your deal ask for a shorter term (but be prepared for affordability checks).

fewcloudy

Hi Bear Family
Can you not just overpay your mortgage by the maximum (10%) that the lender will allow, and pay the extra into a savings account each month? Then come 2018 when restrictions are lifted, you can withdraw it and pay the lot towards your mortgage?

fc

amnblog

A reduction in term is a change in the contract which must be assessed under the regulators current rules.


A voluntary overpayment every month is not a change in contract and therefore not subject to re assessment.