Overpayments vs Part Redemption

AviatorEGHH

Hi All,

Today I learnt something interesting that I am still querying. 

I am overpaying my mortgage as much as I can in order to be mortgage free as early as possible. On my Barclays mortgage, I have a 10% overpayment limit. 

So, at the beginning of my mortgage year, I was calculating 10% of my mortgage balance and dividing it by 12. Then paying that amount as an overpayment each month. This amount doesn't exceed 3x my usual monthly payments and is therefore an overpayment and not a part redemption. 

As I am coming to the end of my mortgage year, I rang Barclays to confirm the amount I can still overpay before the end of the year in order not to get any penalties and they told me I can still overpay the full 10%. I explained that I have been making overpayments throughout the year and asked if those overpayments are taken from the 10% allowable. The answer to this was "No, the 10% only gets eaten into if I make a large one off payment or several payments that add up to more than 3X my usual monthly payments."
This leads me to believe, (and because of my disbelief I rang a second Barclays agent for a second opinion, which was the same) that theoretically, I could make overpayments of 3X my monthly amount every month (but not more) and at the end of my mortgage year, I could still pay off a one off large lump sum of 10%. 

For example: if my remaining balance at the beginning of my mortgage year is £100,000  Therefore 10% =£10,000   //  My mortgage payments are £1000 / month. I could theoretically overpay £3000/month (x12 = £36,000/year) AND my 10% allowance, one off payment of £10,000  So theoretically, I could pay off £46,000 in that year without being penalised.

I realise that the one off payment would be considered a part redemption and it would reduce my monthly direct debit amount.

Is the correct??

getmore4less

This has been discussed before and is in the T&C but not obvious.

One of the most generous overpayment options around that does not recalculate payment.

Even some of the brokers here are(were) not aware of this which could mean for some clients they present a different lender which would not be the best for that client.

getmore4less

In some cases it will be better to carry over the 10% rather than cause a reset of the payment

AviatorEGHH

Thanks for your reply. 

Considering I have a 5 year fixed mortgage. And if I can pay 3X my monthly fixed payments for 5 years. Unless I win the lottery, I’ll never get near needing the 10% as well! Essentially, I can overpay over 30k a year without even touching my 10% allowance and (if I could do it) my mortgage would be paid off in about 2.5 years. Penalty free!