Looking for a Fixed Mortgage that allows >10% lump sum overpayments

cheekeemonkey

Hi

We're looking at moving house and would need a £250,000 mortgage (we feel comfortable going for a fixed rate repayment over 5 years)

The key difference is that I am due to receive a lump sum of approx £50k next year and about the same the year after.

'Ordinary' fixed rates tend to limit to 10% overpayments which wouldn't allow us to pay in this amount in one go.

We found Northern Rock (:eek: ) have a "5 year flexi-fixed" which allows overpayments with no penalty but the rate is higher than most other mortgages i.e. Norwich & Peterborough at 5.78%

Any thoughts on our approach - would we better going for a good discounted deal and putting the cash in a high interest account (in my wife's name to pay lower tax) and use this to pay off the mortgage at the maximum overpayment and then lump sum it at the end of the fixed deal?

Alternatively, what are your thoughts?

PS what whole of market brokers (EDIT: available on the internet for quick quotes) would you advise and would I be able to have an initial discussion such as the above without paying a fee?

thanks for reading...

CM

MortgageMamma

Cm, you have absolutely loads of options.....

Some lenders have fixed rates with no tie ins and unltd overpayments but you are right the rates are slightly higher for the priviledge

you could think about obtaining a flexible mortgage with a savings pot/current account attached and offset the 50k whilst making it readily available shoudl you need it

The majority of lenders offer 10% overpayments, but Nationwide will only allow £500 per month.

Most whole of market brokers will have an initial chat with you for free, have you asked around friends and family for a recommendation?

Spudwud

Mortgage companies charge penalties for early redemptions because they lend you X amount of money and estimate what this lendng will earn them over X number of years. If you are looking to clear it sooner then you will pay a penalty to compensate them for that.

By paying gradually in lump sums, some people seem to think they can almost subtly pay it off and avoid the early redemption penalties, which is why a lot of lenders will not allow anything less than a 5k lump payment to be made and then there will be interest to pay in addition to that.

If you explain to the lender (and it's very likely you'll be limited to the banks) what you're looking to achieve, they will be able to place you on a product which will allow you to pay it quickly without the charges, but on a higher interest rate than normal - this can often be construed as bridging finance, but from the kind of period you've mentioned I doubt it will fall in to that category.

cheekeemonkey

MortgageMamma wrote: »

Cm, you have absolutely loads of options.....

you could think about obtaining a flexible mortgage with a savings pot/current account attached and offset the 50k whilst making it readily available shoudl you need it

Thanks MM

We had an offset mortgage with IF which allowed us to pay off our existing mortgage 10 years early so we have had a good experience with these (I know they don't work for every one)

Just had a quick look at Yorkshire BS: -

5.94% Offset fixed until 28/02/13

£795 fee (this seems reasonable - a lot are £995++)

On a £250k over 25yrs this is £1602 compared to the best I can see on moneysupermarket.com at £1554


One thought you've helped me with is that of the £250k we would like to borrow we have included some provision for a new kitchen/redecoration etc. so guess that off-setting this until we actually need it may well be a good option (and equivalent to paying it off the mortgage) and then putting the cash we receive into this will reduce our mortgage further and as effectively as paying it off (which is what we did with IF thus giving us total flexibility)

I'll give our IFA a call - (he had previously recommended the NR product although this was over 4 months ago) and see what he now recommends.

Any further thoughts/advice gratefully received....

CM