How does it all work?

IAAM

Hi everyone, 

I have a simple question which I’m sure someone will be able to help me with. 

We’ve already been overpaying the mortgage for a couple of years but it’s only now that I’m going all-in with being mortgage-free that I check my mortgage balance regularly. 

However, although we’ve told our lender that we’d like our OPs to reduce our mortgage term, the mortgage term is still showing the original date of April 2033?

So my question is, does the lender review your mortgage balance once a year (Maybe on 1 January or perhaps the anniversary of when the mortgage was taken out) and then they recalculate the mortgage term at that point? 

We definitely ticked the box saying that we intend to overpay but we want our mortgage payments to remain the same and for the mortgage term to reduce, so I know I’ve given them the right instructions. 

I’m just confused why my mortgage details are still showing the original term we selected? 

Grateful for any insight on this

South_coast

Admittedly, I never gave my lender (NatWest) any instructions on what I wanted them to do with my OP's (because they never asked), but my experience was that they never altered the term. When I got to the end of my fixed deal, they recalculated the payments downwards so that I would still pay off the balance over the original term. Eventually, after I made a couple of large OP's which forced them to recalculate the payments again, we got to the ridiculous point where they had my direct debit set at £12.99 per month for the next 20 years - but once I'd cleared the rest of the balance, they agreed the game was up and the term was over!

Phew, that was a long way of saying I don't think it matters too much, as long as you can see your balance coming down after you make the OP's. I'm sure someone will come along in a minute and tell me why I got it wrong though 🤣!

IAAM

Hi SC. 

That’s real helpful to know. Thank you! The direct debit of £12.99 pm did make me chuckle 😂

 I’ve spent the evening searching all of the helpful info on their site, but it hasn’t provided me with any help at all. 😂 

I saw a section which did say you can overpay to reduce your mortgage term but no additional info that says how (or when!) they recalculate that. 

IAAM

So I called my lender today and it seems that lenders differ in how they treat OPs. 

I had actually selected for my mortgage term to be reduced whenever we make OPs (or so I thought!). However, with my lender, this doesn’t happen unless I pay in a minimum of £500 in any given month.

Once I make any payment of £500 in a month then my lender will automatically recalculate the term and then write to me to confirm the new term. 

The bottom line is that, whether the term is recalculated or not, we still benefit from the mortgage balance coming down much quicker. However, every now and then it’s nice to see confirmation that you’ve also got an earlier mortgage end date. 

tacpot12

Well done for getting a helpful answer and reporting it back here.