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Reducing mortgage term
albatoph
Posts: 7 Forumite
Is it possible to reduce the term of a mortgage without incurring the ERC with HSBC? I want to do this as I can afford higher monthly repayments as well as the annual overpayment allowance.
Background-
My 5 year fix ended in December 2023 and in the last 24 hours of the fix I made significant overpayments as I knew I could do this without any penalties.
Part of my intention in doing this was to reduce the time to paying off my mortgage. However this has not been the case.
I have had a confusing conversation on the phone where I was told the term wouldn't decrease but the mortgage would be paid off earlier. But this isn't the case - with my current monthly payment of £800 it will still be 17 years to pay off (same as it was before the overpayments). She couldn't really answer the question about now reducing the term and possible ERCs. Said I'd have to book an adviser appointment.
Background-
My 5 year fix ended in December 2023 and in the last 24 hours of the fix I made significant overpayments as I knew I could do this without any penalties.
Part of my intention in doing this was to reduce the time to paying off my mortgage. However this has not been the case.
I have had a confusing conversation on the phone where I was told the term wouldn't decrease but the mortgage would be paid off earlier. But this isn't the case - with my current monthly payment of £800 it will still be 17 years to pay off (same as it was before the overpayments). She couldn't really answer the question about now reducing the term and possible ERCs. Said I'd have to book an adviser appointment.
0
Comments
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Did you ask for a reduced term for the new product?
What was the interest rate of the new product compared with the old?1 -
No I didn't ask for a reduced term. We didn't "reapply", just picked a new product from the list of options. I realise that my understanding is likely the problem here but I thought the overpayments would have reduced the term and now I'm wondering if I can reduce the term now without paying thousands of ERC to basically start again. The old rate was something like 1.94%. New rate is 4.21%. But because of my overpayments and the term staying the same my monthly repayments are now £300 less than they were.0
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You can easily beat the new rate with cash savings atm, but obviously it's trending down. So term bonds are an option.
How long is the new fix?0 -
5 years
0 -
Hsbc would have to rewrite the mortgage completely to reduce the term.
Just over pay as you can.0 -
I bank with Santander and OPs reduce the term by default. Which is all very well explained when making the payment. However I doubt it can be reversed now for the OP.
I doubt they will be too far off being able to gain equivalence with cash savings via ISA, RS, bonds etc. Any you never know, having it outside of the mortgage might come in handy.0 -
If the term hasn't reduced then the monthly payment amount should have reduced? The total amount of mortgage debt should still have come down.
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