Mortgage overpayment restricted to 10%?

wasim245

I am now in a position to make some overpayments to my mortgage, but reading through my paperwork it states overpayments are restricted to 10% of the outstanding balance per year. I have a mortgage of £220,000 and pay £1075 a month. I believe the maximum I can overpay before incurring any fees is £1290, I would appreciate if someone can confirm this.

Thanks

chelseablue

If you can overpay 10% of the balance then that would be £22,000.

wasim245

I have been confusing myself reading it over and over again "10% of the outstanding balance per year" for some reason I thought it meant yearly mortgage repayment balance. Thanks for your help

Cardinal-Red

I understood it to be 10% of the balance at the start of the year, so each year's 10% allowance will be lower than the prior year's on a repayment basis.

wasim245

in the most unlikely event if I pay 10% this year £22,000, next year it will be £20,000 then following year £18,000 and so on?

Cardinal-Red

Well kind of, but a bit off, because (assuming you are on capital payment), your balance will be lower anyway, i.e. by the capital proportion of your actual payments as well.

I think the easiest thing to do would be to work off your annual statement - there are so many factors in play here, for example remember that for a fixed payment, a higher proportion will go to capital repayment (rather than interest) if you have reduced the outstanding sum.

Get yourself an Excel or web-based calculator and see - the impact is amazing even for small contributions.

wasim245

Thanks for the advice