Over Payments not being taken into consideration

GCM68

Hi

19 years ago I took  out a capital self certificated repayment mortgage, but after a couple of years I had to switch to interest only as I was self employed and going through tough times. Like an Idiot, when things improved I never switched back to repayment.

A few years ago it dawned on me, I had about 8 years left and really need to start making overpayments to start to bring my capital down. I spoke to the mortgage company and asked if it would be cheaper for me to switch back to repayment or stick to interest only and make overpayments as I prefered the latter as it gave me flexibility if I couldn't make an over payment one month. Although she said she couldn't give mortgage advice, she did say I am not penalised by overpaying and anything overpaid would come of my capital. So that's what I did.

Occassionally I have also made a extra lump sum, and always phoned to make sure they have received it, they would confirm and normally ask where thee funds have come from as they need to know it's not money laundering. I would tell them and they would accept that and that's that.

Move on to recent times, in September this year we decided to pay another lump sum, the money was just sat in our current accounts and we thought it's better to pay to the mortgage than earn less by putting it inn saving account. So at the end Sptember we made the payment £1500, and I phoned the Mortgage company a couple of days later to make sure it's been received and she confirmed it had and told be our current balance, but she also said due to money laundering rules they need to see a copy of my bank statement so they can see it's legit.

I sent that to them on 3rd October via email and heard nothing.

Early November I received a letter informing us of our new Interest rate, 5.25% and it gives me the new minimum payment of £209. I entered my balance details and that rate into two different mortgage calculators and they both returned the monthly figure, £158, which was more than £50/month less than what the Mortgage company are asking for.

Onn the phone to mortgage company and was told the relevant department would check and phone me back within 48 hours, 5 working days later nothing so I phoned again. The operator then spoke to the account manager who told her that yes they did get my statements as proof and she would re calculate the figure, as apparenty although overpayments do come of your balance, the are not included when calculating monthly payment until they have seen the proof, but hey they proof was sent before they issued the November letter.  She said she was going to do the recalculation that afternoon and then send me a new letter out. A week later still nothing.

Now my question is, what happens to that extra £50/month they have on my minimum payment? I assume it's not taken off my capital balance as it's not an overpayment, only what  i pay above that £209 would be classed as an overpayment.  I don't know how long they have being stating a higher minimum payment for, but I am concerned that they have been taking £50/month extra interest that I should not have paid.

Sistergold

Hello, I don’t think anyone would be able to answer that as your lender seems to go round and round in circles with you. Which lender is this looks like one to be avoided? Good luck though. 

GCM68

it's a company called foundation Home Loans, when I took the mortgage out it was GMAC-RFC who was a sub prime lender at the time but it has been sold on or had a name change a couple of times since I took it out.

GCM68

Eventually got a letter today confirming that they have applied all of the over payments, a 5 figure sum, and my minimum payment has been reduced by £50/month.  

So moral of the story, if making overpayments on your mortgage, make sure they are applying it to your balance when you pay it.

penners324

Can't you remortgage? How will you pay of the remainder of the mortgage?

GCM68

only have about 6 years left so rather not remortgage as what I may save I would probably pay in fee's  and hoping a big chunk of the capital will be paid off in that time,  only have about £35k remaining (was only a £60k mortgage to start with) and at the moment I can pay the same as I would if it was a repayment mortgage which is what I am doing.

diystarter7

GCM68 said:

Eventually got a letter today confirming that they have applied all of the over payments, a 5 figure sum, and my minimum payment has been reduced by £50/month.  

So moral of the story, if making overpayments on your mortgage, make sure they are applying it to your balance when you pay it.

Thanks OP - this happennd to someone we know a few years back, so never assume.

GCM68

Annoyingly when I spoke to them on the phne and asked for balance, they gave me the balance including my overpayments, but when they worked out minimum payments, they ignore the overpayments and based it on the higher balance.

flashg67

I remember a mortgage (maybe Nationwide) where my overpayments were shown in a separate account - I'm sure that if I needed, I could have asked for these back, hence they weren't taken into account when calculating repayments (in case I did ask for them back)- maybe this was something similar?

GCM68

flashg67 said:

I remember a mortgage (maybe Nationwide) where my overpayments were shown in a separate account - I'm sure that if I needed, I could have asked for these back, hence they weren't taken into account when calculating repayments (in case I did ask for them back)- maybe this was something similar?

Does that not then mean they still charged you interest on the higher balance as the overpayments are not deducted from the mortgage balance? this is what confuses me, have I been paying £50/month (or whatever it's been in past) extra interest because they have not applied the overpayments

jrawle

flashg67 said:

I remember a mortgage (maybe Nationwide) where my overpayments were shown in a separate account - I'm sure that if I needed, I could have asked for these back, hence they weren't taken into account when calculating repayments (in case I did ask for them back)- maybe this was something similar?

I had a Nationwide mortgage with a borrow back facility. Overpayments were still applied to the main balance, reducing interest paid from the next day onwards. There was a separate "overpayment reserve" shown which was the amount I could have borrowed back. (Had I done so, interest would naturally have been charged on the amount borrowed back.) This facility was removed from new Nationwide mortgages some years ago, although I believe my current mortgage still shows the total overpayments, which can be used to take a payment holiday in some circumstances.

OP: if your lender has been charging interest without counting the overpayments, it's a bit of a rip-off. However, you'd have to check the terms to see how it's supposed to work. Maybe it says overpayments are applied at the end of the year, or something, in which case it makes sense to keep them in a savings account until that time.