Confusion about mortgage overpayment

Sam3007

Hi there,

I have overpaid my Halifax mortgage like a week ago but the monthly payment /the remaining term has not changed yet?
Do I need to call Halifax to adjust it? which one is better ? (reduced the payment or the term)?

Another questions please.
If I overpay say £5000 in Jan 23, can I ask Halifax for the amount back (underpayment) after I remortgage with them? or it is only allowed during the current fixed period term? 

Thank

dimbo61

It normally takes about a month for this overpayment to come onto your mortgage statement.
If you normally pay say £1,000 a month you can ask for your payment to remain static while in the fix and this will reduce the term if you overpay 
You can't normally ask for any overpayment back.
It reduces your debt and hence improves your LTV.
When you come to remortgage with your current lender or a new one how much equity you have built up and available mortgage rates will decide what deals are available to you.
You can of course keep back some of the money if you want 

Sam3007

dimbo61 said:

It normally takes about a month for this overpayment to come onto your mortgage statement.
If you normally pay say £1,000 a month you can ask for your payment to remain static while in the fix and this will reduce the term if you overpay 
You can't normally ask for any overpayment back.
It reduces your debt and hence improves your LTV.
When you come to remortgage with your current lender or a new one how much equity you have built up and available mortgage rates will decide what deals are available to you.
You can of course keep back some of the money if you want 

 It seems that I have misunderstood the underpayment bit of the mortgage.
Thanks for the clarification. 

K_S

Sam3007 said:

Hi there,

I have overpaid my Halifax mortgage like a week ago but the monthly payment /the remaining term has not changed yet?
Do I need to call Halifax to adjust it? which one is better ? (reduced the payment or the term)?

Another questions please.
If I overpay say £5000 in Jan 23, can I ask Halifax for the amount back (underpayment) after I remortgage with them? or it is only allowed during the current fixed period term? 

Thank

@sam3007 Comments based on my personal experience of overpaying on a Halifax mortgage. This may or may not apply in your specific case.

- the monthly payment or term do not automatically change, the default is that they remain the same until the next natural change in rate (eg: end of fix) or when you call them and ask them to change it. I've only ever asked them to reduce the monthly payment keeping the term the same, so don't know how different it would be if you wanted to reduce the term. 

- what is "better" will depend on your specific preferences. You can achieve the exact same interest rate savings by reducing the term (keeping the payments the same) or reducing the monthly payment (and continuing to overpay). My preference was the latter as I valued the flexibility, but it may be different for you.
https://blog.moneysavingexpert.com/2014/10/dont-shorten-your-mortgage-term-if-you-can-overpay/

Sam3007

K_S said:

Sam3007 said:

Hi there,

I have overpaid my Halifax mortgage like a week ago but the monthly payment /the remaining term has not changed yet?
Do I need to call Halifax to adjust it? which one is better ? (reduced the payment or the term)?

Another questions please.
If I overpay say £5000 in Jan 23, can I ask Halifax for the amount back (underpayment) after I remortgage with them? or it is only allowed during the current fixed period term? 

Thank

@sam3007 Comments based on my personal experience of overpaying on a Halifax mortgage. This may or may not apply in your specific case.

- the monthly payment or term do not automatically change, the default is that they remain the same until the next natural change in rate (eg: end of fix) or when you call them and ask them to change it. I've only ever asked them to reduce the monthly payment keeping the term the same, so don't know how different it would be if you wanted to reduce the term. 

- what is "better" will depend on your specific preferences. You can achieve the exact same interest rate savings by reducing the term (keeping the payments the same) or reducing the monthly payment (and continuing to overpay). My preference was the latter as I valued the flexibility, but it may be different for you.
https://blog.moneysavingexpert.com/2014/10/dont-shorten-your-mortgage-term-if-you-can-overpay/

I am a bit confused by the article as it suggests not reducing the mortgage term but at the end there is a note asking readers to keep the same monthly payment If the lender automatically reduces it ?! does this mean I should not change the term or monthly payments and just overpay?!?

((PS. Having read some of the feedback, it seems after overpaying, some lenders automatically decrease your normal payments. Of course this can help some with cashflow but it doesn’t have the interest and term reduction effect that this blog is about. So when you overpay, ask them to ensure your standard repayments remain the same))

Nurse2047

I over pay monthly and do not reduce payments, it automatically reduces my term when I log into my mortgage with Santander. An OP that reduces the term and not monthly payment works out better in the long run. 

K_S

Sam3007 said:

K_S said:

Sam3007 said:

Hi there,

I have overpaid my Halifax mortgage like a week ago but the monthly payment /the remaining term has not changed yet?
Do I need to call Halifax to adjust it? which one is better ? (reduced the payment or the term)?

Another questions please.
If I overpay say £5000 in Jan 23, can I ask Halifax for the amount back (underpayment) after I remortgage with them? or it is only allowed during the current fixed period term? 

Thank

@sam3007 Comments based on my personal experience of overpaying on a Halifax mortgage. This may or may not apply in your specific case.

- the monthly payment or term do not automatically change, the default is that they remain the same until the next natural change in rate (eg: end of fix) or when you call them and ask them to change it. I've only ever asked them to reduce the monthly payment keeping the term the same, so don't know how different it would be if you wanted to reduce the term. 

- what is "better" will depend on your specific preferences. You can achieve the exact same interest rate savings by reducing the term (keeping the payments the same) or reducing the monthly payment (and continuing to overpay). My preference was the latter as I valued the flexibility, but it may be different for you.
https://blog.moneysavingexpert.com/2014/10/dont-shorten-your-mortgage-term-if-you-can-overpay/

I am a bit confused by the article as it suggests not reducing the mortgage term but at the end there is a note asking readers to keep the same monthly payment If the lender automatically reduces it ?! does this mean I should not change the term or monthly payments and just overpay?!?

((PS. Having read some of the feedback, it seems after overpaying, some lenders automatically decrease your normal payments. Of course this can help some with cashflow but it doesn’t have the interest and term reduction effect that this blog is about. So when you overpay, ask them to ensure your standard repayments remain the same))

@sam3007 It is indeed a bit hard to get your head around. What they're saying is that when you choose to keep the term unchanged and reduce the mandatory monthly payment, do make sure to keep making overpayments to achieve the same interest rate savings as reducing the term.

That way you achieve the exact same result as reducing the term while retaining the flexibility to go down to the lower mandatory monthly payments if you had any cashflow issues, lost your job, went on mat leave, etc.