barclays fixed mortage overpayment. bit concerned.

fletcher1985

hi guys i have a fixed 2 year mortage with barclays and i can make 10% overpayment each year. im in my second year now and last year i overpaid all of the 10% about £2000 each time over the phone, i told them i would like to keep my monthly payments the same and not have them lowered. i just called to make a big over payment and they told me i cant pay more then 3 times my monthly payment or it will lower my monthly direct debit. my mortage was for 35 years and i wanted to get the years off but its still now at 33. will this make a difference for when i remortage in october. im a bit annoyed because they told me it was ok to over pay last year and nothing will change.

will it also be possible because i make the 3 times over payment today could i ring up tomorrow and make another 3 times over payment its just because i want to get pay asmuch as i can before i remortage because im shared ownershipand want to buy the last 20% ofmy house.

thanks for your help.

Thrugelmir

Making multiple payments in a spaced out manner is a way of not triggering their internal limit. 

Ellen07886

I've had the same issue with them.  I wanted to clear my mortgage when I was made redundant a few months ago but they would only allow it if I paid a redemption fee!  I now pay off money every week to reduce the balance, as long as each payment is less than 3 x the monthly payment it doesn't count as an overpayment and therefore doesn't a) reduce my monthly mortgage payment and b) doesn't count as an overpayment so the 10% overpayment allowance on the account can be paid at any time.  This really is a strange way of doing things. 

You can pay off the 10% overpayment allowance, let them to reduce your monthly payment and then just set up a direct debit to pay off  amount that your mortgage payment was reduced by. 

Cateandco

Hi everyone. I wondered if you could help me clarify this as I’m in the same situation. I have inherited some money, enough to pay off 10% of my mortgage in a lump sum. This is a lot more than 3x my monthly repayment.

I have just spoken to a representative of Barclays on the phone to find out the maximum amount I can pay without incurring an early repayment fee. The terms of my mortgage are: A capital reduction of 10% per annum can be made without incurring an early repayment charge...Following receipt of a lump sum repayment, we will immediately reduce the mortgage balance on which interest is charged and recalculate the amount that you owe and the amount that you pay’.

According to the phone call I have just had, I can make the lump sum repayment of 10% in one go, and then my monthly repayments will then be recalculated and reduced. This counts as a part redemption and so Barclays will not reduce the term instead. However, I can apparently also apply a regular monthly overpayment to bring my monthly payments back up to my current/original/pre-lump sum payment levels, without occurring an early repayment charge. We went over this multiple times (I feel sorry for the person speaking to me!) because I interpret this to mean that I can pay 10% in the lump sum, but then continue making what will now be overpayments - because my contractual monthly payment has been reduced so paying my normal amount each month is now an overpayment - without incurring a fee. 

They have answered all my questions and been very clear but I find myself feeling very paranoid and worried - ‘what if they are wrong?’ They even sought advice from a colleague twice so perhaps I should just believe them, but the early repayment fee is a lot of money to me and would be a real problem if I had to pay it so perhaps I am right to be careful. I expected the answer to be that I can pay the 10% lump sum now but then can’t make any further overpayments till the next year of my mortgage.

Has anyone else been in the same situation? I really don’t want to be charged the early repayment charge by accident. I’d appreciate any advice from anyone who knows about this!

Ellen07886

Mad as is sounds that's how their systems work, any payment over 3 times your monthly repayment is classed as part redemption but anything less than 3 x isn't.  This year I have an overpayment allowance of £1500,  I've already paid off £7458 in smaller amounts less than 3 x my monthly payment and when I spoke to them recently and asked what my overpayment allowance was it was still £1500. If you're concerned, either pay a sum of less than 3 x your monthly payment and once it shows on your account phone them and ask what's left on your repayment allowance it will be the original amount or pay off the 10% and when it's cleared and you get a letter with the new monthly payment on phone them and ask if you can make regular overpayments, they will allow it as long as no single payment is more than 3 x the monthly repayment.

Cateandco

Thank you! This IS mad. I have completely misunderstood the 10% cap in that case - it’s a cap on a single lump sum payment, not on the total overpayments you can make in a year which is what I thought it meant. I think I will do a lump sum of 10% now and then find out if I can overpay any more o ce that’s clearer as you suggest. Thank you - you’ve given me more confidence!

Ellen07886

Glad I could help, don't forget you can always get them to confirm in a web chat you'll have evidence then to put your mind at ease

getmore4less

Getting your payment reduced makes a tiny difference to the extra interest you pay so not worth bothering about 

Cateandco

Ellen yes that’s a good point - I haven’t been able to contact them via web chat as I don’t have a bank account with them and so can’t use the app. Will Investigate if I can access it via the website. 

Getmore4less - I am not sure what you mean - I don’t want to reduce my monthly payment, but I don’t want to inadvertently go over the 10% cap if that is going to mean a penalty fee - but Ellen’s experience shows that doesn’t really apply so hopefully I can pay off the lump sum and keep paying the same monthly amount I already do.

tigsly

Their website says:

Before making an overpayment, please check your mortgage documents to make sure that you’re able to do so. The documents also include details of any overpayment limit and early repayment charges you may have to pay.

So if your mortgage says you can pay 10% in a year - and you pay more I think you may have to pay a charge.. is that not how it works?

ETA I'd have thought this part: 

Paying more than your limit means you may need to pay an early repayment charge. If you’re in any doubt about this, call us on 0333 202 7580. 
would mean if over a year you pay over your limit you will be charged.. 

Cateandco

Tigsly yes that’s exactly what I thought too. However the advice I was given on the phone today, and Ellen’s experience, was that there seem to be two separate types of overpayment - an overpayment of 3x your contractual monthly payment or more, which is considered a partial redemption and counts towards the annual 10% cap mentioned in my paperwork, and then separate to this, overpayments that are less than 3x your normal contractual monthly payment, which apparently do not count towards that 10%.

As I don’t want to pay the early repayment fee, I’m going to do as Ellen suggests and pay off 10%, wait till it clears and the bank sends me the new statement and then I’ll check at that point if I am allowed to make any further overpayments this year. It’s been complicated by the fact that by making a single overpayment of more than 3x normal Barclays will automatically reduce my monthly payment, so if I continue to pay what I currently pay each month, technically I will then be overpaying... but I went over this many times with the person I spoke to so although it seems wrong, I hope it is correct! I will post back here when I have any news.