Halifax Not Reducing Term With Overpayment

jrawle

BikingBud said:

If you are allowed to overpay 10% without penalty per year then with a starting balance of 200K you can overpay £20k and your monthly rate, say £833.33.  The next year according to the maths you are able to overpay £17k as well as your monthly £833.33 and so on and so forth. [...]

I should just add that with Nationwide, the limit is 10% of the original loan amount, not the year's starting balance, so £20k every year in your example. It's even the original amount from when you first take the mortgage with Nationwide, not just your current deal.

snowqueen555 said:

I spoke to Halifax who told me after a year I would need to let them know via a meeting what I wanted to do with the overpayments, but reducing the mortgage amount is that they usually do, you must request it reduces the term. It sounds a bit rubbish tbh because they keep your money for up to a year and it isn't doing anything.

Halifax are apita to be honest, way too much involvement with the advisors who insist on too many meetings sales pitches etc.

It isn't the case that your overpaid money "isn't doing anything". As soon as you make an overpayment, you are no longer being charged interest on that amount, which can be a significant saving over the year. If the monthly payment remains the same, you will pay off more capital by the end of your fixed deal. You can then choose a shorter term for your next product. If the monthly payment automatically reduces, you can put the difference into a savings account and use it to pay off a chunk of the mortgage at the end of your fixed deal.

Think of the mortgage in terms of the remaining balance and the interest rate, not as a monthly payment and a length.

Flower1976

Sg28 said:

Flower1976 said:

I work for a bank (not Halifax) and if you continue to pay your contractual monthly payment after you have made your 10% payment that would not then count as making a further overpayment.

you would just be making your contractual payment - less of it would be paying interest and more of it will be paying capital which means the balance will reduce quicker.

However the following year your repayments will be re calculated lower giving you a lower contractual payment. If you keep your payments the same you are making the contractual payment plus a regular monthly overpayment. (The difference between the old contractual amount and the new lower amount)

Those 12 monthly overpayments will make up part of your 10% allowance.

 If you pay the full 10% lump sum also then you will incur erc.

Well from what I am reading on this thread it seem some banks operate differently but the bank I work for  would only recalculate the contractual payment if there is a ‘trigger event’ like a change to the interest rate. So until that happens, if you continue to make your contractual payment, that would not count as an overpayment which would count towards your overpayment allowance.

kingstreet

See page 23;-

https://www.halifax-intermediaries.co.uk/assets/pdf/info-about-your-mortgage.pdf

Will overpayments reduce my term?

No. Overpayments will not reduce your mortgage term. Whenever we recalculate your monthly payment, we will use the reduced balance to work out the new payment over your existing term. If you want to use regular overpayments to repay your mortgage sooner, but don’t want to formally change the term of your mortgage agreement, remember: • Any recalculation of your monthly payment will include the overpayments. This means that if you only pay the new monthly payment, your loan will be repaid over your existing mortgage term. If you would like to permanently reduce the remaining mortgage term, you will need to speak to a qualified Mortgage Adviser, who will discuss your current and future plans with you.

This leaflet should accompany every Halifax mortgage offer.

Peteshoard

fozzie55 said:

In November 2021, we took out a 7 year mortgage, 5 year fixed, with the Halifax, which would have taken us to retirement age.

It was always the plan to overpay when we could by 10% each year and reduce the term. This was fully clear when we took out the mortgage.

We have just overpaid this years 10% which the calculator on the Halifax website says it will reduce the term by 6 months. The two previous overpayments were similar, so we are on track to pay the mortgage off before the 5 year fix ends. Or so we thought.

Our monthly payments never changed for 2 years so we assumed the term being reduced.
Last month they reduced our monthly payment and say they recalculate every year now following Government and Bank of England intervention last August over the Cost of Living Crisis (Liz Truss!) They said they wrote to us, we never received anything.

We cannot reduce the term without reapplying, which obviously we don't want to do. They can't even tell us when the mortgage ends apart from the official term end from the initial mortgage. The chap on the phone understood the problem and said that they have had a few complaints like this. In helping out overburdened mortgage payers with higher interest rates, they have penalised people with comfortable mortgages and paying them off sooner.

He helped me raise a formal complaint. How come the website lets you calculate shortening the term of your mortgage if they won't actually do it?

Does this sound right please, before I make an idiot of myself? Thank you.

This happened to me, I complained and got my original payment reinstated, lost the difference on 2 months, but these original value payments don't eat into my 10% overpayment allowance.

They said the same process will happen again on the anniversary of the mortgage. So at that point I will need to adjust the term. As soon as I'm out of contract I'm leaving the Halifax.

Will be writing to the FCA. I feel this is profiteering from the bank.

BikingBud

kingstreet said:

See page 23;-

https://www.halifax-intermediaries.co.uk/assets/pdf/info-about-your-mortgage.pdf

Will overpayments reduce my term?

No. Overpayments will not reduce your mortgage term. Whenever we recalculate your monthly payment, we will use the reduced balance to work out the new payment over your existing term. If you want to use regular overpayments to repay your mortgage sooner, but don’t want to formally change the term of your mortgage agreement, remember: • Any recalculation of your monthly payment will include the overpayments. This means that if you only pay the new monthly payment, your loan will be repaid over your existing mortgage term. If you would like to permanently reduce the remaining mortgage term, you will need to speak to a qualified Mortgage Adviser, who will discuss your current and future plans with you.

This leaflet should accompany every Halifax mortgage offer.

As the date of the leaflet is June 2022 it can not be assumed that it has any relevance to either @Peteshoard or @fozzie55 as both of them indicate their mortgages commenced before this leaflet was produced. 

The only T&Cs that are relevant are those stated in the mortgage agreement, conditions cannot be changed unilaterally in the same way that the lender cannot remove your lifetime tracker rate because they have a differing business perspective now.

If the mortgage agreement quoted a payment based upon a fixed rate of interest and also included stress payment indicator then they have already accepted that you can afford that increased payment, although this will only occur outside the fixed rate term.

And yes I do get that with a low interest rate saving or placing surplus cash elsewhere may be a better financial decision but that is not the point of contention here. 

Little_bit_taller

Little_bit_taller said:

Did you let them know you wanted to reduce the term before making the overpayments? It has to be registered on your account overwise it will just reduce your monthly payment although for you this doesn't seem to be happening either.

I am finding that more lenders are bringing the overpayment functionality into their banking apps. I have my mortgage with Santander and they have just updated this functionality and you can chose to reduce term or reduce monthly payment amount.

You said you let them know that you wanted to reduce the term at application stage but have you done it anytime since? I ask because I have checked multiple times with my lender, Santander, just to check for my sanity! I do this so calls are recorded should anything go wrong but so far so good although I am sure I had to correct them at one point because they had it as reduce the monthly payment.

fozzie55

Thank you for all your replies. The phrase "Overpayments will not reduce your mortgage term" is the complete opposite of what we were told in 2021. Also, you can still access the personalised Halifax overpayment calculator on your account when logged in. It calculates your 10% overpayment limit and then shows you how earlier you can pay off your mortgage.

I appreciate all the comments about putting your money in savings rather than paying the mortgage off earlier. I'd rather pay the mortgage off, life's too short.

jrawle

fozzie55 said:

Thank you for all your replies. The phrase "Overpayments will not reduce your mortgage term" is the complete opposite of what we were told in 2021. Also, you can still access the personalised Halifax overpayment calculator on your account when logged in. It calculates your 10% overpayment limit and then shows you how earlier you can pay off your mortgage.

I appreciate all the comments about putting your money in savings rather than paying the mortgage off earlier. I'd rather pay the mortgage off, life's too short.

Reducing the term of your mortgage and paying it off earlier are not necessarily the same thing. If your lender recalculates your monthly payment, you can put the reduction into a savings account. At the end of the fixed term, you can use this lump sum to pay off the mortgage, or if not quite there yet, to reduce the balance further, then take out a new deal with a shorter term. Either way, you are paying off the mortgage earlier.

Reading your exact situation again, you took out a seven year mortgage with a five year fixed deal. Naturally, you will be unable to pay it off before the five year mark, but at that point you could either pay it off (two years early) or reduce your term (maybe paying it off in six years). You don't have more flexibility than that because of your choice to take out a five year deal. The calculator on Halifax's website is for use by people on all sorts of different mortgages. What counts is what the terms (in both senses!) of your particular mortgage are.

kingstreet

BikingBud said:

kingstreet said:

See page 23;-

https://www.halifax-intermediaries.co.uk/assets/pdf/info-about-your-mortgage.pdf

Will overpayments reduce my term?

No. Overpayments will not reduce your mortgage term. Whenever we recalculate your monthly payment, we will use the reduced balance to work out the new payment over your existing term. If you want to use regular overpayments to repay your mortgage sooner, but don’t want to formally change the term of your mortgage agreement, remember: • Any recalculation of your monthly payment will include the overpayments. This means that if you only pay the new monthly payment, your loan will be repaid over your existing mortgage term. If you would like to permanently reduce the remaining mortgage term, you will need to speak to a qualified Mortgage Adviser, who will discuss your current and future plans with you.

This leaflet should accompany every Halifax mortgage offer.

As the date of the leaflet is June 2022 it can not be assumed that it has any relevance to either @Peteshoard or @fozzie55 as both of them indicate their mortgages commenced before this leaflet was produced. 

The only T&Cs that are relevant are those stated in the mortgage agreement, conditions cannot be changed unilaterally in the same way that the lender cannot remove your lifetime tracker rate because they have a differing business perspective now.

If the mortgage agreement quoted a payment based upon a fixed rate of interest and also included stress payment indicator then they have already accepted that you can afford that increased payment, although this will only occur outside the fixed rate term.

And yes I do get that with a low interest rate saving or placing surplus cash elsewhere may be a better financial decision but that is not the point of contention here. 

Fair point, but short of asking everyone their commencement date the only realistic help anyone can give on here other than "phone the lender and ask" is to provide information which can be found in a lender's public space.

fozzie55

Little_bit_taller said:

Little_bit_taller said:

Did you let them know you wanted to reduce the term before making the overpayments? It has to be registered on your account overwise it will just reduce your monthly payment although for you this doesn't seem to be happening either.

I am finding that more lenders are bringing the overpayment functionality into their banking apps. I have my mortgage with Santander and they have just updated this functionality and you can chose to reduce term or reduce monthly payment amount.

You said you let them know that you wanted to reduce the term at application stage but have you done it anytime since? I ask because I have checked multiple times with my lender, Santander, just to check for my sanity! I do this so calls are recorded should anything go wrong but so far so good although I am sure I had to correct them at one point because they had it as reduce the monthly payment.

As our payments didn't change in the second year I just presumed everything was ok. It was only in December, starting our 3rd year of the mortgage, that they reduced the monthly payment. The person on the phone at Halifax said it was due to all banks changing their mortgages last August with the cost of living crisis and Government / Bank of England intervention. He said they have had a lot of complaints.

I'm chilled about it now, my overpayments have still reduced the mortgage and I will pay it off before the original end date.