Paying off mortgage and overpayment

simples45

Ok, after a few crap months of losing both parents, I’m in the process of selling (sold waiting on solicitors) their house which in turn will allow me to pay off my mortgage. The question I have is… I currently owe £120k, and my Santander allows a 10% early overpayment per year, and the pay off percent is 5%… I cannot see in the t&c’s anything about doing both in the same financial year… so my mindset was, shall I pay 10% overpayment allowance which brings the 5% value down? Can I do both in the same year??? Thanks anyone who knows! 

chanz4

10% each year normally

simon_or

I'm sorry for your loss.

What do you mean by "the pay off percent is 5%"?

If you mean the ERC, yes, you can pay off 10% ERC free before redeeming the mortgage to bring down the final ERC

MovingForwards

You just need to pay the 5% ERC, plus a bit for the mortgage redemption cost.

BikingBud

simples45 said:

Ok, after a few crap months of losing both parents, I’m in the process of selling (sold waiting on solicitors) their house which in turn will allow me to pay off my mortgage. The question I have is… I currently owe £120k, and my Santander allows a 10% early overpayment per year, and the pay off percent is 5%… I cannot see in the t&c’s anything about doing both in the same financial year… so my mindset was, shall I pay 10% overpayment allowance which brings the 5% value down? Can I do both in the same year??? Thanks anyone who knows! 

Condolences for you loss.

What is your fixed rate and when does it end?

Normally overpayment is allowed up to 10% of the outstanding balance every year, check but this might run from 1 Jan -31 Dec. So you might be able to pay off 12k (10%) immediately, subject to tying up the estate, and then depending upon your monthly payment 9k (10% of 1 Jan 23 balance) or so in Jan 23.

As you overpay the capital comes down, so the following year 10% of balance will be a lower sum.

If you settle early you will pay and ERC of 5% of the outstanding balance, again as you reduce capital this will drop year on year. 

Best bet ask Santander what the settlement figure would be, you could then work out if it's better to pay all including ERC, or put the capital elsewhere.

Potentially if you have a company pension with some headroom for personal contributions top that up and use the lump to live off from an interest bearing account, Chase @1.5%.

Other may provide other better solutions but consider the bigger picture and the longer term.