How are mortgage overpayments calculated

w00519772

I took out a Post Office mortgage of 111,000 in August last year. I have paid 1461.98 PCM since October instead of £540.91 PCM. Therefore I have made intentional overpayment. I have two questions:

1) I notice that my regular payment fell from 540.92 to 536.38 in November and has stayed at that level since. How could it fall? I have made it clear that I want to reduce the term and not the monthly amount.
2) I am allowed to pay 10% of the amount of the mortgage off per year. How does that work? Is that 10% of the amount outstanding at the beginning of the year (April in my case) or 10% of the amount outstanding each month.

The purpose of this question is to avoid early repayment charges.

Thrugelmir

What date is your annual mortgage statement dated up to?

I would use this as the base point for a year.

sanderella

I think the monthly payment just reduces to reflect the reduction in your debt and interest. You might have to negotiate a term reduction, and I imagine this can only be done at the end of your fixed rate period (if you are on a fixed period).

PaulW922

Can you not ask the lender?

w00519772

PaulW922 wrote: »

Can you not ask the lender?

they are closed today. I am going to ring them again tomorrow. I called last week and the telephone operator was a bit vague.

w00519772

The key facts state that I can overpay the mortgage providing the overpayment does not exceed 10% of the amount owed in April 1st. I did not owe anything on April 1st because I only exchanged in August. Can I still make overpayments of 10% of the amount borrowed (equates to 11k) up to 31st march 2015?

Pipz

Worth checking with the lender when you can, but from my experience:

I can overpay 10% of the balance in a calendar year - my mortgage was drawn down in March and I had until 31st December to make that 10%.

I've overpaid in lump sums and also on a monthly basis with the instruction given to reduce the term - on several occasions the monthly payment has adjusted slightly (+/- £2) but the term has always reduced and the lender has always sent a letter to confirm this.