Is the mortgage lender being fair and legal?! – mortgage overpayment issue

LeeGreg

Hi

I have a 25-year mortgage which is to be paid off in year 2040, and there are early payment restrictions for no more than 10% of the mortgage remaining balance.

I had some spare money, so I paid 10%. I was advised by the bank that I can keep the monthly payment as it is now but shorten the mortgage term by 2 years to 2038, which is a very effective way of reducing overall interests during the whole mortgage term, I agreed and proceeded.

However, a few months later I received the annual statement letter which still says that my mortgage is due to complete in 2040. I phone them and asked. They said that this is the contractual completion year and they cannot change it and they cannot issue ANYTHING in writing to me saying that it is due to complete in 2038.

This does not sound right to me. Based on the annual statement – because I don’t have anything in writing to prove I’d be left with two more years to pay off the mortgage than it should be! Is the bank being fair and legal? I would appreciate any advice on what to do.

In addition, how on earth do I know that they are not charging me interest on 2020-2040 not 2020-2038?

Thanks for any advice

Lee

ACG

I cant imagine it is illegal to give you a statement that says your contractual mortgage ends in 2040 rather than 2038. 

I dont see the problem personally. Presumably you can see the balance has come down by a lump sum. 
You can use an amortization calculator to roughly check the figures stack up. 

I assume you wont be sticking with the same lender for 20 years? So when you go to a new lender, tell them you want to do it over a the new term - all sorted. 

Personally, I think you are making a mountain out of a molehill but I appreciate we look at things differently. 

[Deleted User]

LeeGreg said:

In addition, how on earth do I know that they are not charging me interest on 2020-2040 not 2020-2038?

Because you can see the balance and it's simple to calculate the interest.

There's absolutely nothing to worry about.  All fair, all legal and everything's hunky dory.

Thrugelmir

You are worrying over nothing. The lender can change the contractual end date. However will be required to go through an affordability and due diligence process. For this they'll charge you. 
Continue to overpay and chip away at the debt when you can. 

MattMattMattUK

LeeGreg said:
In addition, how on earth do I know that they are not charging me interest on 2020-2040 not 2020-2038?

Interest is calculated monthly or daily depending on the policy and amount outstanding, the end date of the mortgage has no bearing on that.

Your mortgage contract ends at the end of the term OR when all money owed is repaid, if it ends with an amount outstanding then you are required to clear that.

LeeGreg said:

However, a few months later I received the annual statement letter which still says that my mortgage is due to complete in 2040. I phone them and asked. They said that this is the contractual completion year and they cannot change it and they cannot issue ANYTHING in writing to me saying that it is due to complete in 2038.

It is not technically due to be fully repaid until 2040, so that is correct, however the balance outstanding will reflect your additional payments, interest is then charged on top and your monthly payments reduce this on an ongoing basis.

LeeGreg said:

Is the bank being fair and legal?

Yes they are, you just do not understand your mortgage.

dunstonh

However, a few months later I received the annual statement letter which still says that my mortgage is due to complete in 2040. I phone them and asked. They said that this is the contractual completion year and they cannot change it and they cannot issue ANYTHING in writing to me saying that it is due to complete in 2038.

That is correct.  The mortgage offer is a contract and the terms are laid out at the start.  Overpayments do not change the initial terms.

This does not sound right to me. Based on the annual statement – because I don’t have anything in writing to prove I’d be left with two more years to pay off the mortgage than it should be! Is the bank being fair and legal? I would appreciate any advice on what to do.

It is right but you are reading far too much into minor paperwork.  You have not entered into a new contract with the bank to change the official term of the mortgage.

In addition, how on earth do I know that they are not charging me interest on 2020-2040 not 2020-2038?

You are in 2020 you pay interest on your current balance.  You do not pay interest in 2038 until you get to 2038 and it will be on the balance at the time.

You appear to misunderstand how interest works or how contracts work.   So, you are worrying about nothing.

LeeGreg

Thanks for both advice, ACG and ZX81. Much apprecaited and relived. 

LeeGreg

Thanks for all your replies. I understand better than I did beofre now. 

Brock_and_Roll

Also for most mortgage lenders it is 10% of the original or current balance PER YEAR that you can pay off early. Might want to check that. Nationwide for example is 10% of original balance on my mortgage