Mortgage Overpayment and debt interest recalculation

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I made a few overpayments last month and wondered why the debt interest had not reduced. I found out today that i need to phone them (HSBC) in order to recalculate the debt interest. Has anyone else experienced this ? I assumed they would automatically recalculate the interest just like they would if you had a savings account. If i didnt phone them they would be earning interest on money that isnt there. 

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  • Darwood
    Darwood Posts: 58 Forumite
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    I've just come across this today. According to the lady I spoke to on the phone, it's in their terms and conditions. It's daylight robbery if you ask me!

    I subsequently found this bit of wonderful bit of text hidden away under the heading "If the interest rate changes" on the overpayment FAQ

    "If you’ve made a lump sum overpayment, we won’t recalculate your standard monthly payment automatically. That means the amount won't change unless there is a change in the interest rate. If you'd like to reduce your standard monthly payment to take account of any overpayment, you’ll need to contact us."

    So in other words they take your money and sit on it. Scumbags!

    Oh and they also told me that they don't reduce the term unless you start a new mortgage application; so any overpayments you make just reduce your future repayments - assuming you remember to contact them or get a rate change. Seems they are doing everything they can to keep you paying more interest than you should. To add insult to injury the overpayment calculator on their website shows how many years overpaying can take off your mortgage term. What a joke! I believe this is misrepresentation.

    This should be illegal if you ask me and it should be mandatory that overpayments are applied immediately and all mortgages should have the option to reduce future repayments or the term.

  • StrawberryJam_2
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    Oh no, I have had a HSBC tracker for years, dropping in extra payments over the years, not significant amounts however still a bit here and there.

    Was unaware of the workings. Dare say the thousands have accumulated over the years. I guess I'll not be doing any big benefit.   Right that's me now stopping dropping cash into the mortgage.

    Wish I was more clued up
  • MorningcoffeeIV
    MorningcoffeeIV Posts: 1,946 Forumite
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    edited 12 January 2023 at 2:25PM
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    You've all misunderstood in a spectacular fashion.

    Your overpayments mean you're accumulating less interest. Your monthly payments stay the same, which means your mortgage will be paid off quicker. Your official term stays the same but will actually end earlier.  That's exactly what you want - or should want.

    Not exactly the actions of 'scumbags' or 'daylight robbery' and certainly nothing you would want to be 'made illegal'.

    If you're not keen to save as much as possible, then ask for your payments to be reduced so you can keep paying your mortgages for the full term .
  • South_coast
    South_coast Posts: 4,964 Forumite
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    Correct - the term may officially stay the same, but eventually you run out of money owing. I ran out of money owing when the bank still had the term set to run for another 21 years - they didn't refuse to accept the mortgage was over! The interest is payable on the balance outstanding, so lower balance = lower interest accrued
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
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