Overpayment advice to new homeowner

GoonerByron

Hi all,

New to mortgages after buying my first home recently and require some advice on wanting to make overpayments..

I'm with the Bank Of Ireland UK, it was my understanding when we took the mortgage out that we could make overpayments. In my mind, this meant we could take a longer mortgage term (35 years) so that we were only tied into making lower monthly payments and then overpay to suit us with random cash amounts and bring the balance owed down so that we were paying off at a rate to a term of what we were happy with.

I looked over the small print and was fine with having to overpay in minimum amounts of £500 and no more in a year than 10% of what I owed.

I've now come to make my first overpayment, and was told I only have 2 options from what I can understand. One is to overpay, which is what I wanted to do, but this in turn lowers our regular monthly payments meaning we're surely no better off than we are without overpaying as we'll end up paying nothing extra off?

The second is to reduce the term, which will obviously increase what we're tied into paying regularly every month.. Again, I don't see this as overpaying or we would have just taken a lower term in the first place. We were also told everytime we do this there is a £60 charge so definitely not what we want.

Neither of these are what I considered to be overpaying? Am I missing something? Or is there something my provider aren't offering me that others do?

Any help and advice would be great..

libf

Are you sure there's a minimum overpayment amount?

Or is that overpaying by more than £500 at once triggers having to decide between the two options to list, whereas overpaying small amounts everything just carries on as before...

GoonerByron

libf wrote: »

Are you sure there's a minimum overpayment amount?

Or is that overpaying by more than £500 at once triggers having to decide between the two options to list, whereas overpaying small amounts everything just carries on as before...

Yes, £500 minimum.. This is what's on their site under criteria..

"You can overpay at any time during your mortgage term.

If you’re in a promotional period, you can overpay a minimum of £500 and a maximum of 10% of the outstanding mortgage balance (as at 31st March the previous year) without incurring any early repayment or administration charges."

DandelionPatrol

GoonerByron wrote: »

I've now come to make my first overpayment, and was told I only have 2 options from what I can understand. One is to overpay, which is what I wanted to do, but this in turn lowers our regular monthly payments meaning we're surely no better off than we are without overpaying as we'll end up paying nothing extra off?

Lowering monthly payments is not of itself a problem, since it reduces the time till you accumulate the next overpayment. Ultimately, you end up reducing the monthly payment so much that you end up able to bust the 10% annual overpayment limit with ease so you just save up some more and you remortgage for a lesser amount. But by that time you may want to move anyway.

MisterMotivated

Allowing overpayments to reduce the term doesn't usually mean paying more each month. It just mean that each overpayment means your outstanding balance will be reduced so ultimately the mortgage will end a bit sooner than usual. I'm not certain on Bank of Ireland T&C's but it might be worth checking again. If you ask them to reduce the term without making overpayments and therefore put your monthly payment up, there may well be a charge, but I wouldn't expect an overpayment that automatically reduces the term to incur a charge.

AFK_Matrix

Hi there,

I have my mortgage with Bank of Ireland to and I'm also doing over payments. You haven't said but is your mortgage a fixed one? I assume it is as you have the 10% limit I do on my fixed mortgage. I too was puzzled that the Overpayment only reduced my monthly amount not the term. So I phoned the bank up and when your fixed period ends you then have the choice of what your payment does, pay down the term or lower the monthly payment. So all I am doing is saving up the difference between the monthly amount I used to pay and the reduced payment and just adding this to my overpayment.