Overpayments

calmdavid

"I have been making extra payments of 10% on my mortgage each year in January to reduce the amount I owe. I am currently on the final year of my five-year fixed mortgage. My penalty for overpaying more than 10% in the final year is 1.1%, but I still decided to overpay more than 10% to pay off the mortgage before I move to a variable rate. I have been paying an extra £1000 per month, which is over the 10% limit. According to Halifax, this incurs a penalty charge of £11. However, it has been three or four months, and I have not seen any additional charges deducted from my account yet. My question is, when will this penalty charge be taken from my account?"

Mr.Generous

Depends what your mortgage conditions are, it was annually when I had a Halifax fix many years ago, but could be end of product now. It will save you thousands in interest over the life of a mortgage though, well worth it in my opinion. I started off rounding up to the nearest £100, then started paying off chunks £1000 at a time as and when I built up funds. Suddenly the mortgage goes from being a huge debt to a sum you can think about paying off, then a bit of a push and its gone. It's a long game, no doubt. But most dream of being mortgage free and without that committment and consistant drive you won't achieve it otherwise. Good effort, keep it up.

Themoneyshot

Why would you overpay and incur a penalty rather than put the difference in a savings account, earn some interest, then pay it off the mortgage at the end of the term? It's more flexible and cost effective. 

Newbie_John

Themoneyshot said:

Why would you overpay and incur a penalty rather than put the difference in a savings account, earn some interest, then pay it off the mortgage at the end of the term? It's more flexible and cost effective. 

It could be either due to pursuing a specific goal - pay of mortgage this year, following old guides when it made more sense (not understanding mortgages), having an old fix rate of 6% or some old habit which is sadly no longer relevant.

Anyway regarding the topic, there is a weird quirk with Barclays that if you overpay more than 10% a year by doing it monthly with payments of less than 3 monthly payments then this won't cause additional fees - simply allowing for more than 10% overpayments in a year.
Maybe similar with Halifax? Give them a call and ask.