GUTTED! Overpayment to Bank of Ireland???

Unicorn_cottage

Can anyone help? I rang my mortgage provider today to make what I was hoping to be my first overpayment of £550. Before they took my payment I checked how it would be calculated and they said it would reduce the monthly payment. Of course as a MFW I said that I wanted to reduce the term but it appears very difficult and that I can't do it??? They said come back to us when you have a more substantial payment i.e. £3000. I completely understand that in the first instance my £550 overpayment would not reduce the term of my now 23 year mortgage with an outstanding balance of £140k but I thought this would be accumulative?

Anyone have experience of this?

Tropically

YES! I am also with Bank of Ireland and ALSO complained about this in my MFW diary. I made a complaint about this actually, and got a formal letter saying "Plllllllrrrrlllllrrrrllllrrrrllll, read your contract."

I can overpay £500 at one time, and it reduces each subsequent mortgage payment that they take by direct debit. They do this so that they can make the most amount of money from you, by stopping you from decreasing your capital too fast so their interest payment is higher.

It's not all bad though, you are still reducing the capital and so you are still reducing the amount of total interest you will pay. If you intend to make regular overpayments, you could increase the amount of overpayment by the amount they reduce your regular payment e.g. if your payment decreases by £5/month, increase your overpayment by £5/month. When you remortgage, you can shorten the term. My intention is that when I remortgage, I will bump the payments up to what I originally wanted and shorten the term slightly more.

Unicorn_cottage

Tropically - I am absolutely gutted. Do other mortgage providers do this or just Bank of Ireland? If so when I come to remortgage I will avoid them like the plague. I am going to read my contract now!

Unicorn_cottage

Also so does it mean that standard overpayment calculators do not apply to us? If so is there one we can use to work it out? So p*ssed off - angry face from hell!

sarahsays

I'm not with Bank of Ireland but agree with what Tropically says - next time pay them £555 instead of £550 if they've reduced your payment by £5 - thus your over-payment will still be £550 on top of your original payment, then the next month £560 and so on. Whatever you do, please don't let this put you off overpaying - you'll pay much less interest in the long run and your term will eventually have to lessen as you have less and less to pay. Use your anger to motivate you - a few years back, when I came out of a fixed mortgage deal of 4.99% interest, my bank would only offer me 4.79 when everyone else was getting much lower rates - I was paying around £20 per day in interest. I ended up not going for a fixed deal but throwing everything, including savings, at the mortgage so they would get less money from me - it was tough - sometimes I would only pay off a few pounds or even pay off odd pence, but less then 4 years later I was mortgage free - so they lost a lot of interest due to their inflexible attitude. Keep going and you'll get there sooner than you think.

Unicorn_cottage

Hi Sarah and Tropically

Thanks for your messages. Yes I won't give in but my mortgage offer and subsequent letters made it clear in my mind that I could make overpayments that would shorten the term.

Tropically - what did your contract say?

My Keyfacts statement regarding overpayments says the below and as far as I'm concerned I should be able to make "lump sum" payments of £500+ and not have to endure affordability checks.

"Overpayments are permitted on this mortgage. A lump sum overpayment can only be made by cheque and is any amount that you pay to us in addition to the monthly payment due. When we receive a lump sum overpayment, we recalculate the amount you owe and the amount of interest you pay with effect from the following day. This means you get the benefit of paying less interest straight away. Regular overpayments can only be made by standing order and are amounts that you pay to us each month in addition to the normal monthly payment. When we receive a regular overpayment, we recalculate the amount you owe and the interest you pay from the first of the month after we receive the overpayment. The amount you owe will not be reduced immediately."

Tropically

It's true that overpayment calculators end up slightly off, but not by much. My spreadsheet was off by about £100 over the course of a year and about £5000ish OPs. It wasn't much.

My contract said that too and what they are doing doesn't go against that, but it's definitely annoying. They told me that if I wanted to shorten the term it was like taking out a new mortgage and I would have to reapply for the mortgage. In any case, it is all about the money, they want more interest.

It is still worth it, still do it!!

Unicorn_cottage

https://www2.mortgageapplicationservice.co.uk/web/index.html#/index/OP/makePayment/

Wonder what would happen if I made a lump sum overpayment using the online method - see link above.

ViolaLass

OP, what's your mortgage interest rate?

Unicorn_cottage

2.68% fixed until 2020

Thrugelmir

Unicorn_cottage wrote: »

Of course as a MFW I said that I wanted to reduce the term but it appears very difficult and that I can't do it???

A change of term is a contractual change. This requires lenders to perform affordability checks etc, i.e. incur costs. Applies to all lenders without exception.

Your only option is to increase the level of overpayment that you make. Ensuring that you don't exceed any limits set by the current mortgage product.

By making overpayments you will reduce the interest you pay and the term of the mortgage.