Santander have changed my mortgage to an offset?

Bem56

Hi All

we have had a mortgage with Alliance Leicester mortgage since 2008, it is a tracker at 1% above the BoE base rate. When Santander took over Alliance and Leicester the mortgages didn’t move they remained as A&L.  Our mortgage payments are now £528 a month and we owe £46500 - we have been paying  a steady direct debit of £1200 each month for about 14yrs to pay our mortgage off quickly so we have paid off over £50k more that we should have had. 

 I’ll get to the point,I got a letter from Santander saying thank you for taking out a Santander mortgage,!!!! I phoned them and they said all A&L mortgage have now been moved to santander, BUT there is no change to the terms etc, so we still pay £1200 with approx £528 payment and £670ish overpayment. well  on the 1st of November only the £528 came from my bank so I phoned and made additional payment santander said there was problem moving the direct debit over but the extra payment would come off my balance in a few days, i waited a week and phoned as extra over[payment hadn’t been debited from mortgage balance Santander told me it won’t come off the balance that I see as our mortgage has been changed to an off set mortgage and I literally have no idea what this is… I asked where I can see the overpayments each month if they aren’t coming off my balance and she said I can’t see the balance for the overpayments,as that hasn’t been set up .. so each month  were is my £670ish overpayment going as it’s not coming off my mortgage and I can’t see it on my online banking accounts??? This is really bothering me as I have no idea what offset means, Going fwd I will have no idea how much I have accumulated with the extra payments and where the extra payments are being held etc… I didn’t agree to the mortgage being changed to off set and we weren’t giving any notice that Santander were now our mortgage provider ,, please help as I am very in control of my finances but this I just do not understand at all. Thanks

kingstreet

Imagine you have two pots. One has minus 100 in it, the other has plus 100 in it. The two cancel each other out - that's the rough principle of an offset.

Instead of paying interest on the negative balance and receiving interest on the credit balance, the credit is offset against the negative and you only pay interest on the difference. Sounds like the ideal solution for you.

housebuyer143

There shouldn't have changed you to an offset mortgage, it's a completely different product to what you initially had.
Offset you would have an account with Santander and you pay the overpayment into your account, that money is then used to offset the loan and reduces the interest due, the only difference is you are not clearing the loan, the money is going into your savings account. 

If you are making payments directly to them and you can't see the money anymore it doesn't sound like an offset, as this would have the facility for you to instantly withdraw it if you wanted it. 

If you don't want an offset it might be worth telling them as much and asking they they move you back to an equivalent product.

Bem56

Thanks for simplifying, is it not the same thing then whether the full £1200 - less interest added,  is paid of the mortgage each month or kept in a separate pot,,, swings and roundabouts… am I wrong? Santander  said the overpayment goes into a savings pot that we can access and take money from if we want, I said we wouldn’t want to do that why would we if we were overpaying the mortgage, I needed the money I wouldn’t be paying it off the mortgage, ??

Petriix

It's functionally no different insofar as if you leave the money in the offset account untouched then you'll pay the same interest as if it was an overpayment; except the money in the offset account is available for you to withdraw so you're actually in a better position. 

Bem56

I can’t see where my overpayment has gone, it’s not come off the mortgage and it’s not in a savings or current account.. I’m going to phone santander again, I think if I could see the overpayments it wouldn’t be so bad..

Bem56

update ——- spoke to Santander just now, person number 3….. have now been told it’s not offset, the over payment is being held in a “resevoir”!!!! So I said I want to file a complaint about how this whole migration process has been handled, I have no idea what product our mortgage is anymore, she said complaints will phone me back at some point next week, meanwhile my over payment has fallen into a black hole …

housebuyer143

Bem56 said:

update ——- spoke to Santander just now, person number 3….. have now been told it’s not offset, the over payment is being held in a “resevoir”!!!! So I said I want to file a complaint about how this whole migration process has been handled, I have no idea what product our mortgage is anymore, she said complaints will phone me back at some point next week, meanwhile my over payment has fallen into a black hole …

What on earth! Sounds messy, I'm glad you are getting to the bottom of it. 

ACG

When I worked for a bank, occasionally overpayments would go into a sort of suspense account. The date and time it hit the account would be noted and when it did eventually get applied to the account, the additional interest was automatically credit backs. 

You might need to update the details on the additional payment, maybe a different reference number.

It will get sorted, it might be a bit of a headache but it will be fine. They will probably give you a bit of money for the hassle. 

Bem56

Thanks everyone for your comments, yes it’s as clear as Mud lol….we have been over paying for 20  years we are both 56 and have been projecting the mortgage to be paid in 3 years and we can retire soon,,,, I teach Pilates part time so want to wind down and do this when I retire…I just don’t want anything to mess our future planning that we have worked so hard on for the past 20 years… I will keep you posted when complaints team get back to me… if they ever do !!!!

anoukis

This is common - it's called overpayment reserve (Nationwide) or overpayment balance (Barclays). I'm with Barclays and they have a similar approach. If you overpay regularly you build this overpayment reserve which you don't pay interest on. It reduces your debt (aka principal). When I get annual mortgage statements it tells me how much I overpaid in total up to that date. 

I wouldn't worry if I were you - just request an up to date mortgage statement which should tell you how much you overpaid. 

https://www.nationwide.co.uk/mortgages/existing-mortgage-members/overpayment-reserve/