Accord Mortgages - Help with Overpayments

Parm

I've decided I'm a 'Mortgage-Free Wannabe,' so for my New Year's resolution I've decided to start overpaying and begin clearing that debt! :beer:

But I'm already struggling to figure out the jargon.

My wife and I have a 30-year fixed mortgage with Accord Mortgages, giving us 2.19% above the base rate for the first two years, 3.79% fixed for the next three years, and then reverting to the SVR for the last 25 years. We are a few years in so our current interest rate is 3.79% and this is calculated daily.

An Early Repayment Charge of 5% is applicable in the first five years, however I do have the option to overpay up to 10% of the outstanding balance as at January 1st.

What I want to do is keep my monthly payments going and make additional monthly payments via standing order. So, say for example my monthly mortgage payment was £800, I might pay an additional £200 by standing order.

Just about every online guide that I've read states that I should make sure my overpayments reduce the term of the mortgage, rather than the amount of the monthly payment. Here's where things get tricky.

On the Accord website, the Overpayment information reads:

"If you make extra payments, regularly or occasionally, you will reduce the total amount of interest you have to pay. You could also reduce the term of your mortgage.

Please note that many products during the early repayment charge period have a limit on the amount that can be overpaid each year. Further details can be found in the Key Facts Illustration (KFI) and mortgage offer.

Any extra payments will immediately reduce your mortgage balance and the amount of interest charged. This can also help reduce future payments or, if you prefer, the length of time remaining on your mortgage."

There is similar wording in my original mortgage offer, so I phoned Accord to tell them I want to make monthly overpayments, and that I want the payments to reduce the time remaining on my mortgage.

I'm not sure my wording was quite right, but I've been told this isn't possible. Accord states that there is an automatic annual "account review" applicable to all mortgage customers, and if I have made overpayments, my monthly payment is likely to be reduced after this "recalculation event."

I am told that if I want to keep paying the same amount next year (£800 using the above example), I would need to contact them to create a "Static Payment Agreement." This would ensure I keep paying the same amount each month, however, if my calculated monthly payment is lower due to overpayments (call it £600), then the extra £200 would count toward my monthly overpayment allowance.

My knowledge of mortgages is clearly limited, and I must be missing something obvious. Do any other Accord customers have any experience of overpaying? If so, am I going about this the right way?

Any help on how to proceed with overpayments would be much appreciated.

Southerner3000

Hi we're with Accord at the moment (until we complete) and have been overpaying £300 each month since about July.

I just rang them up and said I want to make overpayments each month and they amended the direct debit amount over the phone. I'm not sure what will happen each year regarding the 'review' though.

Parm

Hi Southerner, thanks for sharing your own experience. I'm going to call Accord tomorrow to ask if I can just amend the direct debit to a higher amount - seems easier than making a second payment via standing order.

I get the feeling it'll still reduce monthly payments after the next annual review, rather than shorten the term, but I'll ask the question nonetheless.

Thrugelmir

Parm wrote: »

I get the feeling it'll still reduce monthly payments after the next annual review, rather than shorten the term, but I'll ask the question nonetheless.

You can increase the amount you overpay by. With the proviso that you remain within the 10% overpayment allowance.

Shortening the term officially is a contractual change. This causes the lender to reassess affordability in accordance with it's regulatory responsibilities.