Choices, choices.. 20 March 2015 at 10:04AM in Mortgage-free wannabe 4 replies 637 views

Farel01

Hi guys,

Was wondering if I could ask for some advice on my mortgage. Both me and my DH got salary increases recently and I have earmarked £500 for mortgage over payments. Choice I need to make is this:

Do I;
1. Phone up Santander, tell them I want to shorten my mortgage term and the extra cash is just added to my monthly payments
Or
2. Somehow overpay every month (The Santander website is incredibly unhelpful, and the last time I tried this they said I needed to phone every time I made a payment, and it still went wrong and I had a lower monthly contribution instead of a shortening of the term. I also know myself, if I need to phone every month I will go nuts and spend the cash on something silly ) Anyone have recent experience with over paying a Santander Mortgage?)

The advantages to 1 as I can see is that the temptation to spend it on something else is taken away, however if my financial situation changes I may not be able to change it back to the original situation.

Details of Mortgage:
138K
23 years left
4.9% fixed, 3 years left, Santander
£839 per month

I was thinking of over paying £435 every month which would reduce my mortgage term to 12 years.

Any advice?

Thanks!

Mrs_Rachel_Trelfa

Hey there,

I have a santander mortgage and I go into branch and ask to make a capital overpayments on my mortgage. I then get asked if I want to reduce the normal monthly payments or reduce the term. As reducing the normal monthly payments won't save any money in terms of interest I ask to reduce the term. This is done as a manual adjustment to the term.

If you want to 'officially' reduce the term and add the overpayments to your normal monthly payment then I believe that is changing your terms of the mortgage and would require a new deal?? I'm sure that someone will correct me if I have got this wrong. You would also be committed to that new monthly for the remainder of the mortgage. If you make overpayments seperate to yoUr normal monthly payment then you are only committed to that figure and if you have the spare money for an overpayments then great, if your car breaks, boiler blows, roof falls in etc and you need to divert the overpayment money to something else then you can.

for us we have a trip to the bank just after the mortgage goes out to make our overpayments each month (if you do it within 10 days of the direct debit date it sometimes thinks that is part of your normal monthly payment and then takes out the difference between the overpayment and the normal monthly payment).

Hope this helps. X

LoveTheCoast

I'd suggest giving Santander a ring and finding out what your options are. We've just remortgaged with a different provider, and like many fixed rates have a 10% overpayment fee-free limit a year. I had phoned them to add £82 to the monthly dd as an overpayment as this is the difference between our new payment and what we are used to paying. The plan was also to send in £1000 lump sums every so often too. However... To be treated as a "capital repayment" and either reduce the term or monthly payments it has to be a minimum of 3 x monthly payments. If we send it in in bits and pieces then it is only recalculated at the end of the year. We decided to set up a savings account purely for the mortgage so the dd for £82 goes into there each month plus other money we save towards it. When we have saved enough we will contact the mortgage company, make the payment, ask for the term to be reduced (rather than the monthly payment) and get saving towards the next capital overpayment.

(Ps I presume you already have a cash emergency fund of several months' of expenses.)

Farel01

I don't need to take out a new deal I believe (http://www.santander.co.uk/uk/mortgages/changes-to-your-existing-mortgage), but it would be a permanent change to my current deal.

I have just seen on that link that you need to go to the branch to pay in cash or cheque. Have I been transported to the 50's?! I have a Santander current account, which means I need to take out cash from my one Santander account to hand deliver it to the other. Do they make it difficult on purpose?

Hi LoveTheCoast, yes I have an emergency fund to would cover us for 6 months or so if we live frugally. I understand the idea of dumping it in a savings account, it's just from next month I'll be earning £500 per month more and I want it gone before I can touch it and book flights to some exotic place! The emergency fund is hard to get to unless really needed.

I'll see about going into the branch, people there always seem more competent than the call center zombies. Especially since this went wrong last time.

Thanks for the replies!

Mrs_Rachel_Trelfa

We have our current account with santander too so when we go in and do our overpayments they do a withdrawal on the current account and apply it to the mortgage, fill in a form to fax off to the mortgage ppl to tell them to reduce the term. No physical money gets taken out. On the paper work from our last over payment they say that you can also make the overpayment as an online transaction or call with the card details of the account you want the cash to come from. However I like human contact so I like going to the branch.

I noticed that the link says that you need a minimum of £500 a time however we do £400 a month and that works. I think they changed it to the 500 after we got ours so under the terms and conditions of overpaying on our mortgage there is no minimum amount a s that's what the guy told me when I questioned it last year after getting my annual statement.

If you're happy to make the extra comments then give them a call and see what they say.