Overpayment calculators 11 January 2021 at 10:20PM in Mortgage-free wannabe 11 replies 302 views

GSTAR

Hi all,

I've started looking in to repaying my mortgage off early (I still have 20 years and £110k left on it!). My mortgage allows up to 10% of the outstanding balance as an overpayment.

Now I've just been trying out some overpayment calculators - including the one from this site (https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/). If I were to pay £500 overpayment each month, it tells me I could pay off my mortgage 10.5 years earlier. Which sounds amazing! However it seems to me these calculators have a fundamental flaw - in that they don't take in to the account the 10% (or whatever %) overpayment limit that most mortgages have.

So for example, if I were to pay £500 overpayment each month, this totals £6000 over the year, which would be OK if my outstanding balance was over £60k. But as soon as it goes below £60k, I'd have to reduce the overpayments so that it doesn't go over the 10% limit.

Have I got this right or am I missing something?

BookmobileBadGirl

Rather than doing cash monthly change the options to 10% annually,

GSTAR

BookmobileBadGirl said:

Rather than doing cash monthly change the options to 10% annually,

Nope that doesn't work. Try it out:
£110k remaining over 20 years
Current monthly payment: £560
Looking to pay extra £500 p/m

Tartan_Mum

Hi GStar the OP calculators are great
for playing around with rough figures to get an idea of what is possible at a high level. 

However, in excel I found a built in report called “loan calculator with extra payments” (or something like that) which let me add different OP for different years based on caps. Because it’s excel it’s really easy to play around with different payments.

Once you get to that point you can save the extra (if there is any) and put down as a lump sum before you next fix or add to emergency savings? 

caeler

@GSTAR I’m with Nationwide. I can over pay by 10% every year. The 10% value doesn’t change as it’s based on 10% of the original mortgage value. Maybe double check the terms of your mortgage to see if this is the same? 

Tartan_Mum

Just in this point above. I’m with Santander and the 10% is based on the balance each year at 31 December so it changes every year. Must be lender dependent like you say so worth checking. 

caeler

I did wonder @Tartan_Mum I’ve only really had experience with Nationwide. Hopefully our posts will help figure the OP figure out which theirs is. 

GSTAR

Hi guys,

I'm with HSBC. I've just looked at the overpayment guidelines here: https://www.hsbc.co.uk/mortgages/existing-customers/overpay/

So basically the 10% limit applies if you are on a fixed rated deal (which I am) - but if you're on a tracker/variable deal then no limit applies.

I think I am more likely to continue to fix my mortgage when my current deal expires - in which case I'll probably still be bound to the 10% overpayment limit.

Anyway it all makes sense now. I just need to do my calculations manually. Thanks for all the help

caeler

I’ve generally favoured a fixed deal for the security of knowing my commitments. Although looking back over the last decade I could have done with being less risk adverse!!  I took out a 5 year fix in 2019 and really wish I hadn’t but I had no idea my circumstances would be different and I’d want to finish up. 

Petriix

You can overpay by whatever you want at the end of your fix. You can just remortgage for a lower amount and make up the difference from savings.

It's well worth overpaying sooner rather than later as the saved interest compounds over the entire remaining term and your monthly payments pay a higher portion of the capital.

Tartan_Mum

GSTAR said:

Hi guys,

I'm with HSBC. I've just looked at the overpayment guidelines here: https://www.hsbc.co.uk/mortgages/existing-customers/overpay/

So basically the 10% limit applies if you are on a fixed rated deal (which I am) - but if you're on a tracker/variable deal then no limit applies.

From a quick glance your HSBC rules look similar to mine with Santander in that the 10% OP limit is recalculated at each year end date (in your case the anniversary of your mortgage being taken out) which means the 10% limit reduces each year. 

Good luck!