Overpaying more than 10%

laura_louise

Does anyone know.. What happens if I overpay by more than 10% of the outstanding balance in one year? I'm with Coventry building society on their ten year fix that has no ERC if anyone is familiar with this product, but curious to know in general too how lenders normally handle this. 

Yorkie1

The details of when an ERC will be levied, and how it is calculated, are set out in the mortgage offer. Some will charge a certain % of the overpayment (over the e.g. 10%) irrespective of how close to the end of the fix you are, others may have a tapering % as you get closer to the end of tthe fix.

Mr.Generous

Its 10% of the full mortgage value when you took it out, the overpayment doesn't drop as you pay back. IE borrow 100k you can pay off an extra 10k per year, not 10k year 1, 9k year 2 etc.

PixelPound

Mr.Generous said:

Its 10% of the full mortgage value when you took it out, the overpayment doesn't drop as you pay back. IE borrow 100k you can pay off an extra 10k per year, not 10k year 1, 9k year 2 etc.

Good point, probably needs to be emphasised more. My paperwork says 10% of the original mortgage value, so if I product transfer after a fix it's still 10% of the original. If I go with another provider the 10% will be of the mortgage amount for the transfer. 

simon_or

laura_louise said:

Does anyone know.. What happens if I overpay by more than 10% of the outstanding balance in one year? I'm with Coventry building society on their ten year fix that has no ERC if anyone is familiar with this product, but curious to know in general too how lenders normally handle this. 

Is it's a no ERC mortgage like the one you have then you can overpay as much as you want without penalty.

In general with most banks it's 10% (or 20% for some banks like NatWest) of the outstanding amount which resets every year (1st Jan or anniversary date) and thus reduces every year.

Nationwide calculates the 10% on the original balance when you first took out the mortgage.

laura_louise

Really interesting... Thanks everyone! 

PixelPound

laura_louise said:

Really interesting... Thanks everyone! 

Don't forget to check out the overpay vs savings threads. If you got the 10 year when it was launched (3.85%) would some of the fixed savings or ISA be a better option?

simon_or said:

laura_louise said:

Does anyone know.. What happens if I overpay by more than 10% of the outstanding balance in one year? I'm with Coventry building society on their ten year fix that has no ERC if anyone is familiar with this product, but curious to know in general too how lenders normally handle this. 

Is it's a no ERC mortgage like the one you have then you can overpay as much as you want without penalty.

In general with most banks it's 10% (or 20% for some banks like NatWest) of the outstanding amount which resets every year (1st Jan or anniversary date) and thus reduces every year.

Nationwide calculates the 10% on the original balance when you first took out the mortgage.

Mine's Nationwide and states 10% of the original loan amount (and actually gives the same figure when I product switched)

YBR

Mr.Generous said:

Its 10% of the full mortgage value when you took it out, the overpayment doesn't drop as you pay back. IE borrow 100k you can pay off an extra 10k per year, not 10k year 1, 9k year 2 etc.

Not always the case - check details from mortgate offer to confirm this.

laura_louise

nic_c said:

laura_louise said:

Really interesting... Thanks everyone! 

Don't forget to check out the overpay vs savings threads. If you got the 10 year when it was launched (3.85%) would some of the fixed savings or ISA be a better option?

simon_or said:

laura_louise said:

Does anyone know.. What happens if I overpay by more than 10% of the outstanding balance in one year? I'm with Coventry building society on their ten year fix that has no ERC if anyone is familiar with this product, but curious to know in general too how lenders normally handle this. 

Is it's a no ERC mortgage like the one you have then you can overpay as much as you want without penalty.

In general with most banks it's 10% (or 20% for some banks like NatWest) of the outstanding amount which resets every year (1st Jan or anniversary date) and thus reduces every year.

Nationwide calculates the 10% on the original balance when you first took out the mortgage.

Mine's Nationwide and states 10% of the original loan amount (and actually gives the same figure when I product switched)

My mortgage rate is 4.2%.. Took it out late last year. Will look into savings rates, good thinking, thanks.