End of term - early repayment grace period? 20 December 2022 at 10:09AM in Mortgages & endowments 6 replies 359 views

JMosef

Morning,

This is most likely a non-starter but I just want to make sure we don't miss a loop-hole. I would appreciate any advice please.

We are hoping to pay off our mortgage next year and so have decided to go on to the variable rate after our fix ends at the end of this month rather than starting a new deal. This means obviously that our repayments jump up as the interest rate goes from 1.49% to 5.59%. We have saved a decent wedge to pay off when our fixed term ends on the 31st December. Speaking to the mortgage company, they said we are unable to make any further over-payment, without incurring early repayment charges, before the term ends. This means that we cannot pay off any more capital until at least the 2nd January, but our 1st payment on the higher rate (calculated based on the higher amount before the over-payment), will already have been taken out.  I wondered if there is any way around this? Seems a little unfair and the difference will almost £400.

Do we just have to take the hit on this? Or will they build when we made the over-payment into the reduction for further repayments? The call-centre were unable to advise on this.

Many thanks to anyone that is happy to offer advice.

user1977

Might help if you told us who the lender is, rather than just "the mortgage company"! I think some have a bit of flexibility, but generally the answer is no, and you've already asked them, so I expect that is their policy.

Though surely the difference is only going to end up being for a couple of days, not the whole month?

dunstonh

 Seems a little unfair and the difference will almost £400.

It is neither fair or unfair.   These things are a line in the sand.   You are either one side or the other.

Do we just have to take the hit on this? Or will they build when we made the over-payment into the reduction for further repayments? The call-centre were unable to advise on this.

Depends on the overpayment method you choose.  One can keep the payments higher but reduce the debt quicker.  The other can reduce the payment whilst retaining the term.

JMosef

user1977 said:

Might help if you told us who the lender is, rather than just "the mortgage company"! I think some have a bit of flexibility, but generally the answer is no, and you've already asked them, so I expect that is their policy.

Though surely the difference is only going to end up being for a couple of days, not the whole month?

Hi, thank you for replying. The lender is Sainsburys (apologies, I didn't realise that would be relevant)

When you say "the difference is only going to end up being for a couple of days, not the whole month", do you mean that they will take the date of our over-payment into account and factor that in when they calculate the next months repayment? As mentioned above the difference in the amount of the repayment before and after the over-payment is about £400, I feel that's a decent difference. Thanks again

JMosef

dunstonh said:

 Seems a little unfair and the difference will almost £400.

It is neither fair or unfair.   These things are a line in the sand.   You are either one side or the other.

Do we just have to take the hit on this? Or will they build when we made the over-payment into the reduction for further repayments? The call-centre were unable to advise on this.

Depends on the overpayment method you choose.  One can keep the payments higher but reduce the debt quicker.  The other can reduce the payment whilst retaining the term.

Hi, thank you. Yes, we have made over-payments in the past but always at the max 10% when we could so, to avoid early-repayment fees, were always advised that it had to come of the capital. So just to clarify, they do take the date that we make the over-payment into account and build that into the new repayment amount for the following months?

Thanks again :-)

user1977

JMosef said:

user1977 said:

Might help if you told us who the lender is, rather than just "the mortgage company"! I think some have a bit of flexibility, but generally the answer is no, and you've already asked them, so I expect that is their policy.

Though surely the difference is only going to end up being for a couple of days, not the whole month?

When you say "the difference is only going to end up being for a couple of days, not the whole month", do you mean that they will take the date of our over-payment into account and factor that in when they calculate the next months repayment?

Yes. Interest is calculated on a daily basis, so if you make an overpayment on 3 January, you shouldn't end up paying any interest on that amount for the remainder of the month. Unless Sainsbury's does things strangely.

JMosef

user1977 said:

JMosef said:

user1977 said:

Might help if you told us who the lender is, rather than just "the mortgage company"! I think some have a bit of flexibility, but generally the answer is no, and you've already asked them, so I expect that is their policy.

Though surely the difference is only going to end up being for a couple of days, not the whole month?

When you say "the difference is only going to end up being for a couple of days, not the whole month", do you mean that they will take the date of our over-payment into account and factor that in when they calculate the next months repayment?

Yes. Interest is calculated on a daily basis, so if you make an overpayment on 3 January, you shouldn't end up paying any interest on that amount for the remainder of the month. Unless Sainsbury's does things strangely.

Great, thank you for clarifying. As time went by I was thinking this must be the way but as I said, the call centre weren’t able to advise 🙂 Still feel like they’ll benefit from my £400 more than I will 😂