Mortgages and lump sum overpayments

[Deleted User]

Planning to remortgage with current lender and take extra borrowing. Only problem is the minimum extra borrowing they will add is £10K and I only want £7K.

I'd rather not just leave the extra £3K on my mortgage and pay lots of interest on it. I note that I'm allowed to overpay 10% a year though.

OK, so I start the new mortgage with £10K extra and pay monthly based on the new amount borrowed. Is there then any reason why I wouldn't be able to pay £3000 cash off my mortgage straight away? Or would lender not be happy with this?

What about the monthly repayments then? Obviously, I now owe £3K less. Of course, it would nice to leave payments the same to overpay (ifI had the money) but could I then decrease the payments to the correct level or am I stuck now at the starting level?

In general, how does it work for overpayments? Can you basically ask lender to take whatever figure or ask for it to be recalculated at any time (obviously, as long as the amount is enough to pay off the loan!)

BoxerfanUK

I don't see why you can't just pay a 3K lump sum overpayment in one hit as long as it means you're not exceeding the 10% overpayment limit.


I'm with Tesco and they allow 20% overpayments, I overpay by the same total amount each month and rather than reducing the term I prefer to keep the term the same and have the standard monthly repayment reducing each month. Each month the standard monthly repayment reduces my overpayment increases by the same amount. It's nice to see the balance of my mortgage plummet.

[Deleted User]

Anyone know about payments? e.g. if I'm paying £200 a month then pay off a lump sum, do the payments then decrease (to take into account lower outstanding total)?

I guess it'd be best to leave the same but do you get a choice?

AnotherJoe

[quote=[Deleted User];70563502]Anyone know about payments? e.g. if I'm paying £200 a month then pay off a lump sum, do the payments then decrease (to take into account lower outstanding total)?

I guess it'd be best to leave the same but do you get a choice?[/QUOTE]

It differs between lenders and usually you can also arrange for it to happen to the opposite way the lender would do it if you didn't state a preference.

And from what I've read here it can also differ depending upon the size of the overpayment, I recall someone posting if they paid off £500 it reduced the term but less than £500 it reduced the monthly amount (or vice versa).

So you need to ask your specific lender and also know what the overpayments will be.