Overpaying

henrik1971

I'm currently halfway through a five year fixed rate with Santander at 4.49% on a standard repayment mortgage. The rate is not great, but when we took it in 2013 it was the best we could get with 15% LTV, and with significant credit card balances, and so affordability was very tight.

Fast forward a bit, and the credit cards are significantly paid down, and the balances I'm carrying have been at 0% for for some time. I get continual repeat 0% deals for 12-24 months (and have done for many years) with a small fee, and so am wondering if I would be wiser overpaying my mortgage and switching the CC payments to minimum or just above minimum instead?

Interested to see what anyone in the know thinks about this. Sounds sensible to me, but want to make sure I'm not missing something.

Also, TBH, I don't even know if Santander allow overpayments. Searching their website for info about it has been a bit of a wild goose chase. The only thing I could find was an FAQ that said you could overpay on a flexible offset mortgage, but no other type of mortgage product was mentioned. Does anyone know the answer to this, and whether there would be penalties, even if I was just paying a couple of hundred pounds here and there?
Thanks..

FreddieFrugal

I suppose it depends on quite how large the credit card balances are.
Whether they will impact when you come to remortgage after the fix.

I suppose if you're sticking with same lender and just switching deal then it's unlikely to make a difference, but could if you were looking to switch to a new lender.

Even at 0%, just having the balances will impact on their affordability calculations.


But benefit of overpaying is obviously at the moment you'll save more in interest by picking away at the mortgage, especially at a rate of over 4%.

It'll also mean that when you do come to getting a new deal at the end of the fix, you can get yourself into a lower LTV bracket meaning a better rate.

We currently overpay by the maximum we can in the year, which is 10%. Fix ending in 2 years. Can do it easily from the internet banking page, set up standing order or do one off transfers from current account, the mortgage is treated as an account so it's all linked together easily. (Nationwide)

I'm not certain about Santander, as you say the info is tricky to find just by doing a google search. Is there no information available to you about your specific product? Like the terms and conditions you saw when you took it out? No info from your internet banking page?

I seem to remember reading on here a couple years ago that Santander only allow overpayments via cheque? Could be remembering wrong or that may no longer be the case.

They obviously want to discourage you from overpaying by making it as difficult as possible to do! Makes sense I suppose as they can make more money out of you.

libf

Don't rely on getting 0% forever. Pay off the credit cards.

getmore4less

Check the T&C of yur mortgage for ovepayment limits before ERC kick in.

Check the true APR of the BT CC deals with min payment

Diverting cash to the mortgage will probably pay off as long as you don't get caught out, save up for the CC, if it gets renews overpay to the max then rebuild the savings for the next deal.

just a cash reverse cash flow analysis, remember just one month getting hit for CC interest could kill a lot of the savings.

also look at slow stooze cards(purchase 0%) frees up cash flow and no fees.

Thrugelmir

libf wrote: »

Don't rely on getting 0% forever. Pay off the credit cards.

A number of lenders have stopped 0% balance transfer offers already.

csgohan4

Don't do it, pay off your balances in full, don't go over to the dark side.

Jhoney_2

henrik1971 wrote: »

I'm currently halfway through a five year fixed rate with Santander at 4.49% on a standard repayment mortgage. The rate is not great, but when we took it in 2013 it was the best we could get with 15% LTV, and with significant credit card balances, and so affordability was very tight.

Fast forward a bit, and the credit cards are significantly paid down, and the balances I'm carrying have been at 0% for for some time. I get continual repeat 0% deals for 12-24 months (and have done for many years) with a small fee, and so am wondering if I would be wiser overpaying my mortgage and switching the CC payments to minimum or just above minimum instead?

Interested to see what anyone in the know thinks about this. Sounds sensible to me, but want to make sure I'm not missing something.

Also, TBH, I don't even know if Santander allow overpayments. Searching their website for info about it has been a bit of a wild goose chase. The only thing I could find was an FAQ that said you could overpay on a flexible offset mortgage, but no other type of mortgage product was mentioned. Does anyone know the answer to this, and whether there would be penalties, even if I was just paying a couple of hundred pounds here and there?
Thanks..

Yes they do but I couldn't remember where online either so took a look for you. It's located here.

http://www.santander.co.uk/uk/mortgages/type-of-santander-mortgages

Khrisjun

Hi,

Im currently with Santander, They allow upto 10% per calendar year overpaid against the starting balance in that calendar year. The minimum overpayment is £500 - They dont process any overpayment less than £500 - I was told on the phone i could send a payment less than £500 but would have to phone through to get them to do anything with it.

Depending how confident you are in keeping track of your finances now, you seem to have more control now than you may have in the past with all debt on 0%, i would consider the overpaying route.

I actually took out a balance transfer card purely to overpay my santander mortgage (Balance transfer of 5k with mb na @1.7% fee for 24months gives 0.85% PA) and my mortgage rate is 4.74% so a nice saving for me. But im confident if the worst was to happen and i missed a payment or similar on the CC then i could clear the debt quickly ensuring i wasn't at risk of paying 17% interest on the CC.

Just my thoughts and depends completely on the rest of your financial situation,

KJ

Thrugelmir

Khrisjun wrote: »

I actually took out a balance transfer card purely to overpay my santander mortgage (Balance transfer of 5k with mb na @1.7% fee for 24months gives 0.85% PA)

Remember to factor in the repayments you make over the period. Every month you are borrowing less.

jozxyqk

A previous thread on overpaying at Santander is here:

https://forums.moneysavingexpert.com/discussion/5280959

But I strongly recommend you pay off your credit card debts first. That will have a major impact on your affordability, credit rating etc. Bear in mind that you're chipping away at the capital every month if you're on a repayment mortgage.

henrik1971

Thanks all for your replies.

jozxyqk - I hear you. When we took the mortgage in 2013 we owed circa £18k on CCs, which meant that we only just managed to borrow the £140k we needed for the house. The mortgage advisor said that if we hadn't had the CC debt, we could have borrowed over £120k more at a lower rate. An expensive lesson...

khrisjun and jhoney - Thanks for useful info and thoughtful replies

csgohan4 and libf- I hear you. Instinctively I feel the same, just the maths are tempting me to do otherwise, hence my original post.

Thrugelmir - I've had CCs for about 20 years, and seem to be getting more repeat 0% offers than ever before, I'm currently inundated with 12, 18, 21 and 24 month offers at the moment, so anecdotally my experience about the potential withdrawal of 0% offers isn't the same as yours. However, because we've been paying down and now have two 'empty' cards, maybe lenders are keener to incentivise me to borrow again. Always in the back of my mind is the thing about banks lending you an umbrella when its sunny and snatching it back when the sky starts clouding over. Having been at £18k and the feeling of the debt almost becoming insurmountable was quite sobering. Have no intention of being there again.

All - Thanks so much for all your replies. I have about three months salary in a Santander 123 account for emergencies, but even earning 2.4% net, I'm reluctant to keep accumlating money in there all the way to six months worth of outgoings like Martin advises in his overpaying article on the main site. The 4.49% mortgage rate kills me and so sticking £1000 through on an overpayment bringing my monthly payment down from £805 to £799 probably sounds a bit whimsical to some, but psychologically at least, it would make me feel so much better..!

On balance I will probably continue focus on the CC, but if I'm particularly flush one month, I will do a mortgage overpayment. Nothing too extreme, but a modest chipping away. Just hope Santander say yes now!