Paying off a lump sum between fixed rates (product transfer) avoiding ERC 1 March at 12:28PM in Mortgages & endowments 3 replies 197 views

ElwoodBlues

My current 5 year fix ends 31st December this year. Intention is to lock in a new fixed rate sometime in the final 6 months (as per what my lender, NatWest allows). I may, or may not want to pay off a lump sum overpayment (beyond my current 10% annual overpayment allowance) at the same time. I obviously want to avoid paying any ERC penalty. Is this going to be possible, or is the only solution to wait until my current fix ends, go onto variable rate, make the overpayment, and then apply for a product transfer (new fixed rate)? Or does NatWest give a window of opportunity at the start of the new fixed rate to make a penalty free overpayment? The lump sum could be a significant amount maybe up to 50% of my mortgage balance.

dimbo61

Well you can pay 10% now and another 10% after the new deal starts.
If your paying 50% off the need to get the very best fixed rate might not be that important 
So maybe look at an Offset mortgage 

kingstreet

Ask the lender.

As an example, Skipton allows unlimited ERC-free overpayments in the final month of a deal even if a product transfer is arranged to start the day after the current deal ends.

ElwoodBlues

dimbo61 said:

Well you can pay 10% now and another 10% after the new deal starts.
If your paying 50% off the need to get the very best fixed rate might not be that important 
So maybe look at an Offset mortgage 

Yes, I'm aware of the 10% overpayment allowance. Although my overpayment allowance currently runs to the anniversary month of my initial loan commencement (October). So I have 10% overpayment allowance available up to 31st Oct 2023. Then another 10% for the 12 next months, or does the allowance/12 month period reset again when the product transfer would occur (on 1st Jan 2024)? If so, that would effectively give me nearly 30% overpayment allowance, which seems to good to be true.