What happens if I overpay more than the maximum in one year?

Ronaldo_Mconaldo

I'm with Santander and can over-pay up to 10% of the outstanding balance at the start of the year in a calendar year. What happens if I pay more than that? Would I pay the early repayment charge percentage on anything over that amount? Would I still get to stay on the agreed fixed rate? Anything else to consider?

Cornucopia

Ask the Bank. It depends on their rules and the rules of the mortgage you have.

Typically, it could be:-

- They will refuse the additional overpayment.
- They will charge an ERC on the additional overpayment.
- They will charge an ERC on the entire overpayment.
- They will move the mortgage on to a different deal, possibly invoking ERC on the whole thing.

I wouldn't even consider doing it without checking with them first.

somethingcorporate

Blimey, that last option seems somewhat unlikely.

I agree though, best check first. You'd like to think they would apply the ERC to just the amount above the limit but you never can tell with banks!

Cornucopia

Yes, I think you're right about the last option. I would guess if that does apply, they would write first.

kingstreet

ERC charged on the excess over the annual allowance is usual.

Thrugelmir

somethingcorporate wrote: »

Blimey, that last option seems somewhat unlikely.

I agree though, best check first. You'd like to think they would apply the ERC to just the amount above the limit but you never can tell with banks!

Probably best to stick to the rules. As once broken why should the lender themselves wish to incur additional costs in administering the account. Therefore is at their discretion.

somethingcorporate

Is overpaying more than the allowance actually breaking the rules?

I expect it to be a fairly normal occurance, when people come into money and want to clear a large chunk of their mortgage.

I expect a standard, probably automated approach would cover it.

martinsurrey

as everyone has said, check with your bank.

Mine charge the ERC on the whole amount of any overpayment that takes you in any way above the annual allowance.

So say £15,000 annual allowance, and you want to over pay £16,000

If you pay £15,000 one day and £1,000 the next, you pay ERC on the £1,000 (as the £15,000 was equal to the annual allowance)

If you pay £16000 all at once, you pay ERC on the full £16,000

lucie_1985

Apologies, just hijacking the thread!


So, the 10% of allowed overpayments, is that calculated on the outstanding balance at the beginning of the calendar year i.e. 1 January, or your mortgage anniversary?


Moot point really as I'm not going to overpay by 30k a year!

kingstreet

It depends on your chosen lender's policy.

lucie_1985

Apparently with Nationwide it's 10% of the original mortgage amount, not the outstanding balance