Mortgage overpayments

fieldofdreams

Hi everyone,

I bought my first house In January last year and, while the mortage value is fairly small compared to the sums borrowed by some people these days, I'm keen to pay it off as soon as I can

For the first year I stuck to the normal monthly repayments just to get my feet on the ground, but am now overpaying by 150 a month :T . The frustrating thing is at the moment I could actually afford to pay more, but my mortgage only allows me to overpay 5% of the balance each year :mad:

The introductory period comes to an end next year and I will be looking to change my mortgage - I was just wondering if 5% is a standard overpayment amount, or are there mortgages out there that allow more or even unlimited overpayments?

Thanks for your help

torbrex

You could look for a flexible mortgage, the interest rate is usually a little higher but they allow unlimited overpayments and lump sum deposits.

Some companies have introductory offers with a lower interest rate, tiered for a couple of years, I got mine with direct line and was able to use this low rate period to greatly reduce my balance, I am still overpaying by more than twice the repayment request.

fieldofdreams

Thanks torbrex

Have been reading some of the posts in this section for a while now ( first post today ) and have to say am inspired by the efforts people are making to clear their mortgages

Its really made me look at my mortgage in terms of how much you save by making overpayments, its a real eye opener when you put the numbers into an overpayment calculator and see how much the total payable amount and terms comes down

I'm not going to let it affect the the good things in life ( I'm a single bloke so I've got to have some fun :beer: ) but I'm going to try and put as much spare cash as I can towards my mortgage

Kaz2904

My mortgage is with the Principality and I am allowed to repay 5 or 6* the minimum payment (forgotten now but need to ring and see as have just applied for a bt 0% cc to stooze into the mortgage!). I think that most Nationwide mortgages allow a £500 per month repayment and others allow a 10% maximum yearly payment.
The thing that I would recommend is that you save any extra you could afford to overpay in a high interest account so that when you do come to remortgage you have a lump sum to pay off and don't have to add fees to your new mortgage.
I agree that you should still enjoy the good things in life as it makes for a boring life if you never do anything to enjoy yourself. Also, whats the point in saving to be mortgage free so that you can enjoy such and such if you pull yourself out of the loop and so don't get invited to it anyway!

riad_2

I've got a Natwest interest only mortgage at the moment which allows for 10% overpayments per annum, of which I will try and take advantage of the 10% allowed as much as I can afford... when you remortgage I would suggest looking for one that will allow you to overpay 10%... I think this is the norm with interest only mortgages, unsure about repayment types though.

fieldofdreams

Thanks for the replies - I can think saving any extra cash I have in a high interest account is the way to go, so that I can make a one off payment when I do come to remortgage

When remortgaging, is it is possible to change the term from the original mortgage? eg I currently have a 25 year mortgage but like I said the loan amount isnt massive, so I'm thinking if I can get a 15 year mortgage, although the monthly payments will be higher, I will be paying less interest in the long term

Thanks again for your advice

scottp_2

fieldofdreams wrote: »

When remortgaging, is it is possible to change the term from the original mortgage? eg I currently have a 25 year mortgage but like I said the loan amount isnt massive, so I'm thinking if I can get a 15 year mortgage, although the monthly payments will be higher, I will be paying less interest in the long term

Yep theres no problem with that at all. The reason most people do not do this however is so that they are not locked into a high mortgage repayment should something happen, however what may be a good idea would be to reduce the mortgage term slightly, increasing the monthly payment and then overpaying to top it up to the current level of overpayment, so you still have a little to fall back on should something else come up.

Hope that helps!

djbd1973

scottp wrote: »

Yep theres no problem with that at all. The reason most people do not do this however is so that they are not locked into a high mortgage repayment should something happen, however what may be a good idea would be to reduce the mortgage term slightly, increasing the monthly payment and then overpaying to top it up to the current level of overpayment, so you still have a little to fall back on should something else come up.

That is a really good idea, and it still allows you to enjoy life, whilst keeping an eye on potential interest rate rises which you could meet with the overpayments should you need to especially if you are already disciplined to pay a set amount.

tsharp

One thing i haven't worked out with overpaying is that if you make an overpayment, does the monthly payment you pay thereafter decrease to match the now lowered capital you owe?

An example; we pay £692 a month.
If i was to over pay by £100 one month, does my monthly set payment change in accordance, or does the overall sum owed just decrease slightly, thus lowering the interest you pay on it?

Martinslovechild

tsharp wrote: »

One thing i haven't worked out with overpaying is that if you make an overpayment, does the monthly payment you pay thereafter decrease to match the now lowered capital you owe?

An example; we pay £692 a month.
If i was to over pay by £100 one month, does my monthly set payment change in accordance, or does the overall sum owed just decrease slightly, thus lowering the interest you pay on it?

With my old mortgage (which had an overpayment facility), I was always asked if I wanted to make a payment into my overpayment fund (which would not affect my monthly payment amounts) or against the capital (which would affect my monthly payments).

Personally, I always said that I wanted the payments to go into my overpayments fund because:-

1. I could ask for a cash drawdown at any time
2. My monthly mortgage payment would not change as a result of the payment

tsharp

I like the idea of the payment going down each month, but I'll see what Nationwide do when i actually start making them.