Overpayments can you keep the monthly payments the same?

topcat007

Currently reading the big bad book of terms and conditions of TSB mortgages.

it states in the overpayment section "We set your new monthly payment so that it repays your loan over the term we orgianlly agreed with you"

If i am paying £600 a month but then decide to overpay £100 every month i do not want them to recalculate it so the 'base' £600 drops to a lower amount so it is spread over the original term as i would be playing catch up and have to keep upping the overpay.

Do they have to recalculate it or can it be kept at £600?

I hope this makes sense it all got a bit wordy.

dimbo61

You can ask for your monthly mortgage payment to remain static ! At £600
Your overpayments will then reduce the term and save you Interest.

Yorkie1

You usually get the choice whether to reduce the term or the payments when you overpay.

If you choose to reduce the term, then the regular payments will remain the same (as long as the interest rate remains the same).

The only comment I'd make about reducing the term, is that it removes flexibility in the future if, for any reason, you need to make lower payments. You'll be committed to paying the remaining reduced capital off over the shorter period, whereas if you didn't reduce the term, you'd have the original period to pay off the reduced capital at lower per-month amounts.

topcat007

Yorkie1 wrote: »

You usually get the choice whether to reduce the term or the payments when you overpay.

If you choose to reduce the term, then the regular payments will remain the same (as long as the interest rate remains the same).

The only comment I'd make about reducing the term, is that it removes flexibility in the future if, for any reason, you need to make lower payments. You'll be committed to paying the remaining reduced capital off over the shorter period, whereas if you didn't reduce the term, you'd have the original period to pay off the reduced capital at lower per-month amounts.

Yeap these are the two options i have found over the page but i do not wish to reduce the term because i want that flexibility of dropping back to lower payments.

At the same time i do not want to pay less per month as then i have to keep adding more overpayment

so i should be able to keep the "base" payments static if i ask ?

Thanks

Rollinghills

Yorkie1 wrote: »

The only comment I'd make about reducing the term, is that it removes flexibility in the future if, for any reason, you need to make lower payments. You'll be committed to paying the remaining reduced capital off over the shorter period, whereas if you didn't reduce the term, you'd have the original period to pay off the reduced capital at lower per-month amounts.

This is not true. By overpaying you are not asking them to reduce term, it is just what happens as you pay the balance off quicker. But the original term remains. You can always stop overpayments and go back to your contractual payments.

topcat007

I am going to write exactly what it says in the book think i may have gone mad with all these terms and conditions today. I am on a fixed rate so not sure if anything would get recalculated on mine (part in bold)

"If you have a repayment mortgage , overpayment will not automatically reduce your mortgage term. This is because whenever we recalculate your monthly payment for example at an interest rate change, we set your new monthly payment so that it repays your loan over the term we originally agreed with you"

This second part make it sound as though i will have to keep reviewing it all the time instead of it remaining static?

"If you want to make regular over payments to pay your loan off sooner but you don't want to ask us if you can formally change the term of your mortgage agreement, you will need to remember to review the amount of the monthly payment whenever it is recalculate and increase the amount of your regular over payment".

topcat007

Lump overpayments

"you can call into your local branch or write to us enclosing a cheque. You need to tell us if you want us yo use the money to reduce the monthly payments by keeping the mortgage term the same, if you would like to reduce the remaining mortgage term you will need to speak to a adviser."

Sounds as though it is going to be a case of keep working it out myself which is a bit of a pain

jimjames

If you pay in just after the payment is taken for your mortgage you can then stay in control of the amounts.

So you overpay £100 with £600 standard payment, next month the mortgage drops to £595 and you then do next payment for £105.

By adjusting you then keep same overpayments.

Rollinghills

Those are very restrictive conditions, a bit annoying isn't it. They should not make it harder for people to overpay and reduce term if they want to. Who is the lender?

Thrugelmir

Rollinghills wrote: »

Those are very restrictive conditions, a bit annoying isn't it. They should not make it harder for people to overpay and reduce term if they want to. Who is the lender?

Changing the term is a change of contractual terms. If you want to overpay then make payments by standing order rather than direct debit. As lenders systems are geared to recalculate the amount due at every change of interest rate. Simply not possible to individually administer mortgage accounts.

topcat007

Thrugelmir wrote: »

Changing the term is a change of contractual terms. If you want to overpay then make payments by standing order rather than direct debit. As lenders systems are geared to recalculate the amount due at every change of interest rate. Simply not possible to individually administer mortgage accounts.

How does paying by standing order rather than direct debit make a difference?

Thanks !