Does reducing the term breach overpayment rules?

PRDMKT

dunstonh said:

PRDMKT said:

 I want to overpay more than the 10% lender permit

That is actually different to what you have indicated in your earlier posts.    That would not trigger an ERC on the full amount as you are not asking for a reduction in the mortgage term formally.  

As said higher up, overpayments that do not reduce your monthly payment reduce your mortgage term passively. i.e. it happens by default without the need for you to formalise anything.     That is not the same as asking your lender to formally reduce your mortgage term (which would increase your monthly payments).

On the contrary, I have spoken with my lender who have advised that this can be done without the need for underwriting (within reason) and is subject to no early repayment charge

That bit doesn't sound right.    If you are exceeding the 10% allowance and are on a fixed rate deal then you should be subject to the ERC on the excess over the 10%.

I think it's because it's a contractual change it's acceptable- I believe certain lenders permit these changes within reason as the principal interest rate remains the same during the fixed period.

Either way, I seem to have been given the greenlight to reduce my term substantially without being subject to any early redemption charges

dimbo61

Most lenders allow up to 10% overpayment of the outstanding balance each year.
Now if you make say a 10% overpayment in January  and then try to make another 10% overpayment in February  you will get hit with an ERC charge.
However if you make regular overpayments each month and then a " one off large overpayment of 10% in one year many lenders will ignore this.
If your overpaying a mortgage at 3% then the lender can Lend this money to a new customer at 6% !!!!

PRDMKT

dimbo61 said:

Most lenders allow up to 10% overpayment of the outstanding balance each year.
Now if you make say a 10% overpayment in January  and then try to make another 10% overpayment in February  you will get hit with an ERC charge.
However if you make regular overpayments each month and then a " one off large overpayment of 10% in one year many lenders will ignore this.
If your overpaying a mortgage at 3% then the lender can Lend this money to a new customer at 6% !!!!

This has nothing to do with overpayments, rather reducing the term, and whether it is subject to any fees for doing so