Remortgage: Lower balance than expected upon completion date

DVB23

Hi All, I have tried to look throughout the forum but couldn't find any suitable thread. 

I will be remortgaging at the end of Nov23. My new lender has already approved my mortgage and I already have an example of a payment schedule based on the approved amount.

Because my new deal has a significantly higher interest rate, I have been managing to overpay on my current deal which means that my redemption statement will be approx 5k lower than my new mortgage amount (e.g. asked for 200k but my balance will actually now be 195k). 

What happens here? Does the new lender reduce my monthly payments? Does it reduce the length of the mortgage? What happens to these 5k which my new lender will essentially not "use"?

la531983

Have you asked the lender to change the term of the mortgage? If not, the mortgage continues for the term you agreed initially and the £5k will be used to recalculate what the minimum payment is.

kingstreet

If you don't ask for a a reduction in the loan amount and a new offer, the solicitor handling the transaction will hand you the surplus funds at completion. You can then use it to pay down the new mortgage within your ERC-free limit.

la531983

kingstreet said:

If you don't ask for a a reduction in the loan amount and a new offer, the solicitor handling the transaction will hand you the surplus funds at completion. You can then use it to pay down the new mortgage within your ERC-free limit.

I've misread what he typed then, he can ignore my post 🤣

DVB23

I am afraid to ask anything that may change my interest rates, I locked the rate in a "not so bad" time and didn't want to mess or lose the locked rate. Do you think it's worth to still ask for it to be reviewed or should I just get the surplus ?

la531983

DVB23 said:

I am afraid to ask anything that may change my interest rates, I locked the rate in a "not so bad" time and didn't want to mess or lose the locked rate. Do you think it's worth to still ask for it to be reviewed or should I just get the surplus ?

Only you can decide that. It will also depend on what level of overpayments you are planning to make, if any, in the first 12 months. If you take the surplus £5k and pay it off the mortgage, it will count towards the overpayment limit (usually 10% per year) so you would need to take that into account if you were maybe planning to pay £15-19.5k off the mortgage extra in the first 12 months.