Overpaying & then moving (mortgage)? 19 December 2022 at 4:44PM in Mortgages & endowments 5 replies 301 views

B0bbyEwing

Just found a sheet with a job list I'd forgotten about & asking this was one of the jobs. 

So say you're on a fixed term mortgage like ours is (5yrs) which ends next year.

Say you overpay the maximum today. Your deal then ends next year, say 1st Feb. For the finicky, if 1st of a month is unlikely then it's only an example but let's say 31st Jan if it's that much of a big deal.

You can get a cheaper mortgage with another provider elsewhere, but the one you're with right now will let you overpay more (Nationwide - let you pay 10% of the original borrowing).

So the day after your deal ends, can you overpay another full amount but then the day after that (or a few days if it needs to clear), you can then sign up with another provider on a fixed term deal?

Hope that makes sense to you. Basically asking about paying up 2 maximum amounts & then moving on. In our case 10% would be £10,200. To move on & overpay the new providers max, it may be something like £8,000 or less, hence why I'm asking about paying it through Nationwide & then moving on.

silvercar

Surely you would just redeem your current mortgage when it ends, 1 Feb in your example. Then you take a new mortgage with your new provider for the amount you want. So if you now have a mortgage of 100k and repay 10%, you have a mortgage of 90k on 1 Feb. You then take a mortgage of whatever you want to start on 1 Feb or later. When the solicitor handling it redeems your mortgage and sorts the new one, he will just ask you for the difference. 

B0bbyEwing

Ok bear with me because what you just said went over my head. My only dealings with mortgages so far has been taking one out & then renewing with the provider I'm with, that's it. Redeeming mortgages?

I'll go with proper figures so that at least my end it doesn't get confusing. So if you could disregard example figures & go with these...

I borrowed £102k. As per Nationwides setup, I can overpay £10,200 each year I'm with them.
My mortgage is currently at about £78k-£79k but we'll say £80k for easy round figures. 
My mortgage actually expires in September '23 IIRC. 

In my head what I'm thinking is ... overpay today for example sake. £10,200.
Takes it down to £69,800.

1st October '23 comes round, overpay £10,200, takes it down to £59,600 (ok it'll be less actually because of the monthly payments in the meantime but let's keep it simple) then if say Santander or Halifax or whoever are considerably cheaper to fix in, jump ship to them.


What I'm taking from what you say (& I may well have got the wrong end of the stick by the way) is overpay £10,200 now so I'm down to that £69,800.

Then fix in with whoever once my Nationwide deal expires.
Who knows what their overpayment stipulations are but let's say 10%. That's £6,980 .... £3220 less than what I'm asking about.

I'm sure I've misunderstood something somewhere. 

JMA74

You apply to a new lender for the amount of borrowing you want to have.   If that is less than the amount required to repay your mortgage then the solicitor will ask you to transfer a payment to make up the amount.  

For example:

You have a mortgage of £80,000 with Nationwide
You want to make your £10,200 overpayment today so you end up with a mortgage of £69,800.
You then want to move to a new lender (Halifax for example) on 1st October.  Lets say that your balance that you owe nationwide at end of September is £65,000

You literally just apply to Halifax for the amount you want to have your mortgage start with them on 1st October. You ignore any overpayment allowances
For example you want to make an overpayment of £25,000 then you apply to Halifax for a £40,000 mortgage. 

The solicitor will get the redemption statement from Nationwide, see that its £65k, check the mortgage document from Halifax and see its only £40k and then will send you an invoice for £25k to get enough to pay off Nationwide. 

Your mortgage then starts with Halifax and the overpayment allowance is fresh as you havent actually made any overpayments yet

B0bbyEwing

@JMA74 thanks for the explanation. Surprisingly to me, I think I've got it. Usually takes me a few goes. 

This will be the test then...

So right now as I'm within my 5yr fixed deal, I can overpay £10,200 per year every year if I want to. I assume £10,200.01 either incurs a penalty or I just simply can't do it.

So my Nationwide deal then eventually comes to an end as we've discussed. Let's roll with your £65,000 & I'm taking your £25,000 as the basis of this next bit....

So in theory, that is the moment in time that I could pay up the full balance, in this case £65,000, in cash & not be hit with any penalty at all, as my 5yr deal will have ended?

Obviously I'm not going to be in a position to do that, I'm just curious if that's basically the case.

JMA74

Assuming you roll on to the standard variable rate with Nationwide you could pay the full amount penalty free.

Your understanding is correct though

On the 10200.01 bit,  you only pay a penalty on the amount over your allowance so it would probably be 1% of anything over £10200.  So if an overpayment of £11000 is made, this is £800 over your allowance so your penalty will be 1% of £800 or £8