Question about overpayments....

JennyP

I am keeping a diary but wanted to ask a specific question.

I have two buy to let mortgages that I am trying to pay off. Both are currently on a fixed rate so there is a maximum overpayment amount that can be made each year. They are with different companies.

I paid the maximum amount off on each last week from my savings to give myself a headstart. Each mortgage company then sent me a letter saying that my monthly payments were going to be reduced.

I rang the first company and said please can you keep it the same as it was as I am trying to pay it off earlier. They said fine.

I rang the second one and they said if I keep the mortgage repayments the same, then that would count as extra overpayments so I cannot do it without penalty.

Does that sound right? I was surprised. I thought I would be allowed to keep the payment amount the same and make the maximum overpayment.

greent

It's probably in the super small print in the t&cs - but technically the 2nd company are correct in saying that the extra amount is an OP - and so would therefore be liable for penalties.

How about setting the extra for mtge 2 aside into a savings account each month? The mtge won't be reducing by this amount, but you're creating a sort-of offset for you, so you can net them off when figuring out what you owe? When the fix ends you can then pay this saved lump off the mtge.

Old_Git

another option might be to overpay mortgage 1 by more than you had planned .

greent

Old_Git wrote: »

another option might be to overpay mortgage 1 by more than you had planned .

Although that would depend whether provider 1 would allow penalty-free increased payments after the 10% OP, as opposed to just keeping payments the same as the previous amount

JennyP

They won't.

greent

JennyP wrote: »

They won't.

In which case the personal offset with the 'extra' from Mtge 2 saved into a separate account until the fix ends seems a reasonable compromise, I'd guess

JennyP

That's what I'm doing!