Santander overpayments - term reduces BUT may be a problem with regular payments...?

mcddrums

I am keen to overpay on my Santander fixed rate mortgage, especially before I remortgage this year.

I'm aware of two types of overpayment - a lump sum and a regular amount.

I was under the impression I could just over pay a regular standing order amount for as long/short as I wanted. Upon speaking to Santander, they said the amount would be added to the monthly repayment figure to reduce the term.

However, they then told me that they would calculate how much shorter that would make the term, and once agreed I cannot go back to the original mortgage term. So for example, if I could no longer afford the extra payments, I could not go back to what I was paying (or less) over the original term (35 years).

This would obviously be a concern, if for example they reduced the 35 year term, down to say 30 years with the intended ongoing overpayment, yet I fell on hard times and asked to reduce the payment back to the original amount.

In fact, they told me I'd have to remortgage.

Does this sound right? I thought it would be as simple as setting up a standing order each month and the term showing that it was reduced by whatever I'd managed to pay at whichever point in time I check it?

Alternatively, could I just send in "one of payments" each month for the same amount, thus achieving what I intended in the first place?

Zero_Sum

Just do regular one offs.

kev2009

Hi,

I made my first over-payment, albeit a small amount, last year. I phoned them up, asked to make a one off over-payment for that year, told them how much and I told them i wanted the term to stay the same and reduce my monthly payments. This was all ok and they reduced my monthly payments accordingly. I am planning to do the same this year. My fixed rate mortgage is up next year and I plan to take another fixed term mortgage so I want the term to remain the same but reduce monthly amount i pay. I personally prefer to make a one off payment each year, if possible, as I can then decide do I need the money or can i afford to use it to OP mortgage.

My thinking is lowering monthly for now and keeping term the same means if interest rates go up, i've at least got it over the same term so hopefully wont be a big increase. My plan then once I fix again for 5 years, is to then switch and reduce the term and keep my monthly payments the same. I'm then hoping i can OP a reasonable amount each year to knock my mortgage down so that by the end of that 5 years, i'm in a much better place in terms of owing less and be in a better position to re-fix on a lower mortgage, fingers crossed it works out ok!

Kev

mcddrums

Like that thinking Kev. Especially re the term and potential rate increase contingency!

kev2009

Thanks mcddrums, I'm with Santander also. I believe they have built a online section to OP once you login but I've not used it yet, last year it was "coming soon" when i was OP so hence I called them up and tbh it was very easy and didn't need to wait on the phone long so I#ll probably do the same again this year, only takes a few minutes.

As said once I can hopefully get mortgage down and therefore monthly payments much lower, then I can breath a bit easier so to speak and then decide whether to continue OP or to stop OP, let the mortgage run its remaining course and then use OP money to go into Pension or something else. However, I want to get it low enough so that mortgage payment is low and IF suddenly interest rates rise to high levels, i could potentially then just pay it off.

Kev

Slappermum

I think you've got some things mixed up there. You can stop regular overpayments whenever you like.

What "cannot go back to the original mortgage term" means is that, if some time down the line, you aren't able to afford the fixed arranged repayments, you won't be able to tell them "but I've overpaid earlier in the year so cut me some slack".

aussie_in_wales

Slappermum wrote: »

I think you've got some things mixed up there. You can stop regular overpayments whenever you like.

What "cannot go back to the original mortgage term" means is that, if some time down the line, you aren't able to afford the fixed arranged repayments, you won't be able to tell them "but I've overpaid earlier in the year so cut me some slack".

Exactly this. I am overpaying monthly at the moment but can stop doing so if needed but the reduction in the term of the mortgage that has already been applied due to overpaying cannot be reversed.