Confused over 10% mortgage overpayment??

kimwp

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

kimwp

Tuffnjay said:

Thanks everyone my confusion was due to having overpaid every month for past two years and nothing else ever being changed before.  This time I made the 10% op at the beginning of the mortgage year hoping to reduce overall interest going forward. I understand what you have all said Id just assumed base payment would return to £527 for the remainder of the year, but by it being it dropped it makes me feel as if approx £980 will be paid less this year and therefore was false economy, I realise its my lack of understanding how interest occurs. Thanks for your replies.

If the base payment has gone below the previous minimum payment, then probably they have reduced the monthly payment to maintain your overall term and your recent overpayment will have very little effect on saving you interest (see the moneysavingexpert page on this - it's close to the bottom of the article).

I really recommend that you talk to Halifax to understand if this is the case and if so consider asking them to reduce the term as a result of the recent overpayment - this does not require an affordability check, it just means recalculating the term by keeping the monthly payments the same.

getmore4less

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

kimwp

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

getmore4less

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

What that link says is you can leave your payment at the higher level if you want, which is different to reducing the contractual term which they don't do

On some of their mortgages you can set a payment to never reduce only go up if need to pay of the loan within the contractual term.

Barclays do not change the contractual term,  you can revert to a min payment based on that schedule at any time.



If nationwide really are reducing the contractual term then that will be a problem to put it back if the rates go up and you want lower payments to reflect your original contractual term should need underwriting again.

kimwp

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

What that link says is you can leave your payment at the higher level if you want, which is different to reducing the contractual term which they don't do

I think we are probably talking at cross purposes. Barclays may not reduce the contractual term, but the remaining term is reduced - which is what reduces the amount of interest you pay by making overpayments.

Barclays do not change the contractual term,  you can revert to a min payment based on that schedule at any time.

Good to know.

If nationwide really are reducing the contractual term then that will be a problem to put it back if the rates go up and you want lower payments to reflect your original contractual term should need underwriting again.

Presumably the situation of wanting lower payments (whether or not to reflect the original term) could arise with rate rises regardless of whether a term had been reduced or not?  If they are reducing the term, then that is in line with the monthly payments that you originally agreed to when you had an affordability assessment as to whether you could cope with a rate rise.

getmore4less

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

What that link says is you can leave your payment at the higher level if you want, which is different to reducing the contractual term which they don't do

I think we are probably talking at cross purposes. Barclays may not reduce the contractual term, but the remaining term is reduced - which is what reduces the amount of interest you pay by making overpayments.

quite 

 as I keep telling people.

The contractual term determines your min payment
The payment determines your actual term.

kimwp

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

What that link says is you can leave your payment at the higher level if you want, which is different to reducing the contractual term which they don't do

I think we are probably talking at cross purposes. Barclays may not reduce the contractual term, but the remaining term is reduced - which is what reduces the amount of interest you pay by making overpayments.

quite 

 as I keep telling people.

The contractual term determines your min payment
The payment determines your actual term.

@getmore4less, in the interests of trying to understand if I have missed something, I have combed through my mortgage agreement, annual mortgage statements and summaries and the Nationwide General Mortgage Conditions - "contractual term" isn't featured anywhere, only "remaining term", which has reduced as I have made overpayments. Barclays Mortgage glossary features does have "contractual remaining term" and "outstanding remaining term", possibly related to the fact that they (according to your earlier post) allow reversion to the minimum payment based on the originally agreed term end date.

It might be worth considering that if you start talking about "contractual term", it might be worth specifying how this is different from actual term to avoid confusion as if someone has "term" in their Ts&Cs, they could easily draw the conclusion that they are one and the same thing.

I'm now pondering what situations would result in monthly payments being higher, such that you could then reduce them to the minimum based on the outstanding part of the "contractual term"?

Thrugelmir

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

What that link says is you can leave your payment at the higher level if you want, which is different to reducing the contractual term which they don't do

I think we are probably talking at cross purposes. Barclays may not reduce the contractual term, but the remaining term is reduced - which is what reduces the amount of interest you pay by making overpayments.

quite 

 as I keep telling people.

The contractual term determines your min payment
The payment determines your actual term.

I'm now pondering what situations would result in monthly payments being higher, such that you could then reduce them to the minimum based on the outstanding part of the "contractual term"?

As a borrower you simply reduce your monthly payment to the required level. You are making a simple matter overly complex by totally overthinking matters. If you set a standard higher amount that's collected by direct debit then it will automatically be recalculated by default at the switch of a product. Likewise if you have a floating interest rate product such as a tracker or are on the lenders SVR. To control the situation pay by standing order as opposed to direct debit. 

kimwp

Thrugelmir said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

getmore4less said:

kimwp said:

Thrugelmir said:

kimwp said:

Your agreed mortgage monthly payment not including any overpayments is 527? If so, it sounds like they have taken your overpayment into account, but kept the mortgage term the same, so reduced the monthly payments. And if so you need to ask them to reduce the term as a result of the overpayment rather than reduce the monthly payment.

The term can only be amended if the borrower is not constrained by having a fixed term product. Which will result in ERC's being applied. Amendments and large one off payments need to made once a fixed term ends and before another is committed too. 

The term can be amended while being in a fixed period by 1. overpaying (and asking for that to result in a term reduction) or 2. asking the lender to amend the term by increasing the monthly payments;

1. If you overpay, you can stay within the overpayment allowance and not get overpayment penalty or you can go over the overpayment allowance and pay an overpayment penalty. The ERC (early repayment charge) may or may not be related to being in the fixed period while paying off your mortgage completely, but an overpayment will not incur an ERC unless it somehow causes the ERC terms to be triggered. In my case, the ERC is only related to the time left on the mortgage term, so I won't pay an ERC even though I will pay off my mortgage within my fixed period (and I think this is likely for others as well.)

2. If you ask the lender to amend the term, while you are in a fixed period, they will not reduce it to shorter than the remainder of the fixed period, but (providing you pass affordability) will reduce it towards this.

Source: I have both made overpayments (under and over the allowance) and arranged for my term to be reduced while being in my fixed period. Due to this my mortgage will be paid off within the fixed period. No ERC charged so far.

which lender?

lenders have different policies on how they treat overpayments and the regular payment some will allow it to remain at the previous level some don't.

Do any actually change the contractual term?

Nationwide and Accord, but looking at the Halifax, Santander and HSBC websites as a quick sample, they also do the same. They all have different policies about their automatic response to an overpayment, but you can reduce the term on all of them due to an overpayment.

When you take out a mortgage, you're not making a contract to make payments for a certain length of time, you're contracting to pay back a sum of money plus interest with various terms and conditions applied related to how you pay it eg you can make overpayments up to a certain amount without a penalty etc.

Are you are seeing a reduced contractual term on your mortgage statements?

The full term is contractual as a hard end date, there should be clauses that describe how a  minimum monthly payment will be calculated.

Yes - the term is reduced on the mortage statements.

I'm not sure what you mean by "contractual as a hard end date" - the full term can be reduced by overpaying or arranging to increase the monthly, which implies it isn't a hard end date in that it can't be moved. The minimum monthly payment is calculated on the amount outstanding and the agreed term (which can be re-agreed) - it is a matter of maths, there are no contractual clauses that describe the calculation.

You seem to think that the originally agreed term end can't be changed - I'm curious as to how you think people pay their mortgage off early?

I am not saying you can't pay off sooner,  the hard end date the agreed term is the latest you can pay it off. there will be something that says the borrowing is amortised over the term calculating the payment.

It is certainly not true for all mortgages that the contractual full term can be changed by overpayments I have one with Barclays.

To change the term permanently commits to the higher payment

 

Saying that the borrowing is amortised over the term just means that the remaining owed (including expected interest) is divided into equal payments so you pay the same each month.

From Barclay's website:
https://www.barclays.co.uk/help/mortgages/repayments-rates/monthly-payment-amount-reduced/

If you are not allowed to make overpayments, then obviously you can't use them to reduce the term. But if you can make overpayments, then (according to the above link - because the alternative to reducing the payments is reducing the term) the term can be reduced without permanently increasing payments.

If you make an overpayment, you now owe less. The possibilities are to reduce the amount of each payment or reduce the number of payments made (ie reduce the term) otherwise you will pay too much. Therefore this is changing the term without committing to a permanent higher payment because there is no increase to the permanent payment. An overpayment is a payment over and above the permanent payment, not a change to it.

What that link says is you can leave your payment at the higher level if you want, which is different to reducing the contractual term which they don't do

I think we are probably talking at cross purposes. Barclays may not reduce the contractual term, but the remaining term is reduced - which is what reduces the amount of interest you pay by making overpayments.

quite 

 as I keep telling people.

The contractual term determines your min payment
The payment determines your actual term.

I'm now pondering what situations would result in monthly payments being higher, such that you could then reduce them to the minimum based on the outstanding part of the "contractual term"?

As a borrower you simply reduce your monthly payment to the required level. You are making a simple matter overly complex by totally overthinking matters. If you set a standard higher amount that's collected by direct debit then it will automatically be recalculated by default at the switch of a product. Likewise if you have a floating interest rate product such as a tracker or are on the lenders SVR. To control the situation pay by standing order as opposed to direct debit. 

I think you have misunderstood my ponderings. The question was not how to reduce the payments, but what situation there would be where the monthly payments were higher than the minimum that a clause to allow future payments to be based on the "contractual term" would be needed.
I think it would only be where an overpayment had been made and the term subsequently reduced, but then the mortgagee changes their mind or circumstances and wants the monthly payments to reduce.
Other situations of paying less are
- where someone makes monthly overpayments and stops (which I think is what you are referring to)- this would not be a change of monthly payment. 
- or using previous overpayments to underpay - but it's the overpayment reserve that allows this- perhaps it's an option for using this facility.