Direct line overpayment on mortgage does not seen right. We still owe despite overpaying 100 a month

graylinghunter

In 2000 we switch mortgages to direct line on one  the key features was the ability to overpay if if we were able to and repay early. As with many things life takes over and we find ourselves in may 2020 still paying on a mortgage that does not seem to of reduced in term. I spoke to direct line and they said its will knock a couple of month off but at the time i was told by overpaying would bring the to term down considerably . Its a capital repayment type we choose to overpay by 100 a month for last 7 years so flat thats £8400  should have been taken off then additional interest.    In my minds eye we should have paid this off last December at latest but was told yesterday we still owe another two months. after yesterdays payment we have had no mortgage holidays and always paid on time whats gone wrong? We have either been advised wrong or the way direct line applied the mortaguge overpayment has worked in their favour not ours. I have asked for all statements to be forwarded to me. Anyone else been through this?

[Deleted User]

Stick your details in https://www.halifax.co.uk/mortgages/mortgage-calculator/overpayment-calculator/

Use the figures from when you started overpaying and see whats the output

Caz3121

when in 2000 did the Direct Line mortgage commence, what was the amount and term of the mortgage?

AnotherJoe

The first 8-9 years from 2000 had interest rates around 5-6%. And then that doesnt take into account your interest rates, did you ever move to a lower rate?

Without numbers its impossible to calculate what should have happened. But as a starter, how much did you owe in 2000 and what was the interest rate and what was your monthly repayment ?

Do you have annual statements for each year ? Really the date shouldn't have come as a shock, each year you would have been able to see the change.

There is also another possibility, which i hesitate to outline but which means you haven't been overpaying in reality.

Bear with me.

When you overpay can choose to reduce the amount you need to pay going forward, or the term. If you dont change the term, then they will usually adjust your normal monthly payment from that point on to keep the term the same.

So for example, made up numbers, lets say you would  normally pay £1,000 a month. To end in 2025.

But you start overpaying an extra £100. Each month, since that means you owe less, then to keep the term to 2025 they will reduce your monthly payment slight. Might go from £1,000 to £995 lets say. And the next month to £993 after youve overpaid another £100.

As I say, made up numbers. Has your monthly DD been changing outside of interest rate changes? That would be a sign I'm right. If not forget this bit.

graylinghunter

it was 20 years   borrowed 41000,     first payment 20th nov 2000.
in 2002 borrowed extra 12.500 home improvements and 2003 further 20000.  then from aug 2009 started to pay 100 a month over monthly payment.   So for arguments sake 13,100 extra over that 11 year period.  exact month dates of loans i have requested pending statements....

graylinghunter

in fairness direct line have offered to write a complete spread sheet to reflect how much interest i have saved over the term but it certainly hast had the effect of knocking years off the mortgage the direct line advert implied at the time... i feel quite underwhelmed by this at moment..

penners324

Sounds like your standard repayments have been going down.

AnotherJoe

Look back through the last year of bank statements. Is your dd different every month?

Accountant_Kerry

Was it an annual review mortgage, they may have only adjusted the payments yearly rather than monthly but the inpact is the same that you pay per month over the same term rather than reducing the term perhaps

Thrugelmir

If you didn't revise your overpayments when the rate of interest was changed. Then any overpayments made to that date, would have been taken into account when recalculating the standard monthly repayment amount, i.e. reducing the monthly direct debit. The calculation works out the amount to pay off the mortgage by the end of the term. Hence why your mortgage term may not have shortened as much as you expected. 

Having said the above. The overpayments have saved you a considerable amount of mortgage interest over the years. Far from being bad news. 

The lender hasn't benefited at all. 

dunstonh

All you need to do is look at your statements.    They show the interest for that month and the monthly payment and then the running balance.

Which sub account was the overpayment applied to?  i.e the original debt or the further advance?   

Did you buy a new mortgage deal at any point in that period?   These can actually reset the overpayment - i.e. remove it.