Mortgage overpayment beginner questions

W.Ford

Hi all,

I'm really keen to be mortgage free (arent we all) and have a couple of idiots questions:

1.)I need to double check how much it is possible for me to overpay by without being penalised, my mortgage doc states the following:

'You are restricted to 10% of the outstanding balance per year. You are able to make overpayments to the sum of 10% of the loan amount on any part of this mortgage in each 12 month period"

I assume this is addition to regular monthly payments, so for example if my mortgage is £80000 and my monthly payment is 500 x12 = £6000 per year, I can make a max of £8000 extra overpayments, not just £2000?

2.) I overpay on my mortgage by around £250 a month at the moment, as a result my statements show a decreasing mortgage payment so i then up my overpayment to compensate for the decrease. Is this how I should be doing it or can the mortgage company be forced to keep my payments at the original higher level somehow?

Thanks in advance!

[Deleted User]

Can you view your mortgage online? With ours, HSBC, there is an overpayment section which details your annual allowance and if you have made OPs what the remaining balance is.


For example I made regular monthly overpayments but as not all the annual allowance was used up I made a manual over payment.


Normally you would want any OPs to reduce the term not the monthly payment unless you started with a large mortgage and came into some money to OP making the monthly payment more manageable.


Cheers

LadyGnome

Some mortgage companies give you the option of how you want the overpayment applied. So you can elect for the term to reduce rather than the monthly payment. However, there are merits to your current approach because if you do hit a tight patch financially your monthly mortgage payment is lower due to your previous OP which might give you breathing space. It depends on the size of your current payments v income and the stability of your income e.g. if you are self employed then having the option of lower payments during a lean period might be handy.

A_Frayed_Knot

The 10% is over and above your normal monthly mortgage payment.

So long as your total mortgage does not include any sub accounts with no interest being added, this is the figure they would base the 10% on, but better to ask to be safe, you don't want to o/p more than your allowance as that would incur a penalty charge.

They also reduced my monthly payments first time I o/p a large sum, but went into branch and insisted they keep my payments the same each month, no matter how much o/p's I made. Took around an hour as they had to phone foreign shores to implement my request.

W.Ford

Thank you, 'A Frayed Not' that is exactly what I was hoping. I will give the mortgage company a ring and see if it can be applied differently. Sadly they are a bit backwards and their is no online facility, just an annual paper statement.

A_Frayed_Knot

Just read your post again and you say you o/p by £250 a month already, so this would be included in your 10% allowance, just to be clear. Anything o/p that is more than your normal monthly payment (the amount you agreed when taking out your mortgage) will be counted towards your 10%.

How did you get on with the mortgage company? some don't have a clue what you are talking about when requesting payments stay the same, others know but pretend they don't :mad:

My first large o/p, I requested it be taken off the mortgage amount and not the sub accounts, they pretended they didn't have a clue what I was talking about, said I couldn't do that, so when hoe and read up on it. Was I mad when I found out I could do that, but never rectified it as they probably hoped I would, Next time, they didn't get away with that one I insisted took a bit of time and 1 manager + 2 tellers, but eventually I got what I wanted.