Overpayments to end mortgage-help with numbers

moneysavinggirl40

I need some help number crunching overpayments so that I do not breach 20% of overpayment allowance per year on outstanding balance. Would anyone be so kind and help?

Starting off with 85K in view to end mortgage. 9year term at present but looking for new deal. I'll probably renew with current provider. Their rate is 2.06% for 5 years fixed.I could ask for reduced term if it's necessary.

If I am happy to pay £1660 per month am i breaching my 20% overpayment balance in any of those 5 years within inital period? for when 1 month after 5years are up i'd like to end mortgage. ERC's are at 2% but am unsure if that's on the amount outside of the 20% allowance. I would like to avoid if possible but I don't want to over pay too much-ERC come into affect, or too little-have mortgage for longer so pay svr after year 5.

What are your thoughts?

Tom99

[FONT=Verdana, sans-serif]You probably need to give a bit more information.[/FONT]
[FONT=Verdana, sans-serif]Exactly what overpayments are allowed ie how does the 20% work and what is the total monthly repayment without any overpayment.[/FONT]

bexster1975

Agreed, not enough info here. Also, why do you need to go into SVR after 5 years? Surely just a new deal needed. ERCs will only apply for the 5 years in all cases I have ever seen. I wouldn't reduce the term, you never know what will happen.

Bexster

moneysavinggirl40

It is 20% of overpayment allowance per year on outstanding balance. starting off at 85K. £863 per month if i kept 9 year term. happy to pay £1660 per month. With very little to remortgage in year 5 would lenders give me another mortgage? Happy to pay off if i am so close.

moneysavinggirl40

I understand it will be 17K max overpayment allowance in first year, how much would max be in second, third and fourth? Considering the starting balance each year has also reduced. Will i reach my target of ending mortgage at the end of 5th year without paying ERC? will i still be able to continue to pay £1660 without breaching overpayment allowance therefore avoid ERC? I also could put a lump sum of £3000 at the end of each year if allowed to, without breaching

Tom99

[FONT=Verdana, sans-serif]At £1,660 per month you will pay off the mortgage in month 54 approx.

[/FONT] [FONT=Verdana, sans-serif]Assuming the 20% overpayment is based on the starting balance at the beginning of each year.

[/FONT] [FONT=Verdana, sans-serif]You are overpaying by £797 per month and will exceed the 20% allowance in month 44 approx.[/FONT]

moneysavinggirl40

Tom99 wrote: »

[FONT=Verdana, sans-serif]At £1,660 per month you will pay off the mortgage in month 54 approx.

[/FONT] [FONT=Verdana, sans-serif]Assuming the 20% overpayment is based on the starting balance at the beginning of each year.

[/FONT] [FONT=Verdana, sans-serif]You are overpaying by £797 per month and will exceed the 20% allowance in month 44 approx.[/FONT]

is this factoring £3000 lump sum overpayment per year also? if we factored that in too? when would the mortgage be repaid? So i presume if i reduced term then it would help with my overpayments stay within 20% allowance. would reducing it by a couple of years help?

Tom99

moneysavinggirl40 wrote: »

is this factoring £3000 lump sum overpayment per year also? if we factored that in too? when would the mortgage be repaid? So i presume if i reduced term then it would help with my overpayments stay within 20% allowance. would reducing it by a couple of years help?

[FONT=Verdana, sans-serif]Including the lump sum you will pay off the mortgage in about month 48 but breach the 20% overpayment in about month 35.[/FONT]
[FONT=Verdana, sans-serif]If you reduced the term to 8 years you might just breach the 20% with the £3000 payment in month 36 or otherwise half way through the 4th year at about month 42[/FONT]

moneysavinggirl40

Decided to reduce term to 5 years back in June 2018 when i got a new 3
year fixed product. which meant my contractual payments increased. but it mean i could put more towards my 20% overpayment allowance. I am fortunate enough to still be able to overpay by £300 dd per month plus i did an overpayment lump sum of £7500 few months back.

When I paid the lump sum the lady on the phone at Tesco Mortgages asks, would you like to reduce your monthly payment or keep it the same? I said keep it the same.

If i say keep it the same, does that mean i am contributing towards overpayments off my capital? is this factored in to my 20% overpayment allowance per year?


My question is will they be seeiing the amount "staying the same" as OVERPAYMENT? Do I need to factor this in to my overpayment allowance for the year, along with the overpayment dd's and lump sum overpayments?

I'd like to knnow as i do not want to incur an ERC. I do not want to breach 20%overpayment allowance.

I hope to pay off mortgage by the end of initial 3 year fix period, without incurring ERC. I believe i have 4 years 4 months left on term now

Tom99

I think you would need to ask them to make sure. The lump sum and other over-payment so far will reduce the amount of over-payment you can make because the opening balance will be lower.
If your contracted min monthly payment has not changed you would think the over-payment only starts at that figure but I think its worth checking.