Santandar Over Payment Confusion

Dew_2

I'm probably being super dumb here but I don't understand this: I have a 5 year fixed Santander mortgage that ends July 2018. I originally borrowed £135K and have being making monthly over payments of £300 to bring down the term.

Santander are now telling me I need to make a minimum of £400 over payment a month otherwise it can't reduce the term only the monthly payment as there isn't enough of the capital amount due to reduce the term.

I've never come across this with any previous mortgage provider where they have upped the over payment in order to still be able to reduce the term.

My question is whether I should pay more every month? My overall goal is to pay off the mortgage as quickly as possible and also to pay the least in interest.

Can anyone explain this to me simply please?

TrickyDicky101

I suspect what they mean is their systems are not set up in such a way to accommodate anything other than a reduction in the ongoing monthly payments for overpayments less than £400.

The reality is that your mortgage term is determined by you in how much you pay each month - so if they reduce your monthly payments (in response to overpayments less than £400) then if you simply increase your overpayment the following month so that the total that you pay is effectively [Original monthly payment + £300 overpayment] you will be reducing your term in line with your original intentions. This of course is a bit of pain as you would need to do this every month.

Or, if you have the capacity, increase your overpayments to £400 pm as they suggest.

Dew_2

Thanks TD - I'll have to re-read your helpful reply a few times for it to sink in!

audigex

If you're overpaying, forget what the mortgage company says... the minimum payment stops being a factor, and the only things that matter are how fast you're paying off the capital and how much interest the loan is accruing.

What they seem to be saying is that their system isn't set up to "think" in the way you do, so rather than adjust the term and adjust the minimum payment to match, they have to adjust the overpayment and reduce the minimum payment by a smaller amount.

The end result is the same, though, it's just assigning different "purposes" to the different payment.

Decide how much you can pay a month and then ask them how you pay that amount. Whether they label some of it as the minimum payment, or some as overpayment is pretty academic, it all goes to the same place.