Overpaying mortgage with 2 parts?

JJB51

Hello ,

My current mortgage term runs until August 2028. I have a good fixed rate at 1.49% so mathamatically speaking I know I am better off just saving into a high interest account. I do save monthly but wanted to push a bit more to see the balance shrink that bit quicker on my mortgage.

My mortgage is split into 2 parts after part exchanging my first home.This is with a standard barclays mortgage. My ERC rules are a 10% capital reduction each year, anything over incurs a 5% fee on the amount repaid. This rule applies to each "part" seperately.

Original house price 215k with a 21.5k deposit.

Part 1 - 123k

Part 2 - 39.6k

Total of 162.6k

I would ideally like to have the smaller part of the mortgage paid off by the time it comes to remortgaging. I know I could just split overpayments over both balances to not worry about ERC's but I am curious on how it all works and the second part seems a bit more managable short term.

My main concern is ERC's with overpaying the smaller part. I guess I would like to know/understand the following:

1. When/how is the 10% calculated? is it current mortgage balance on January the 1st? So if my balance was 40k on January 1st does that mean up until the end of December I can pay off 4k extra during the year?

2. Is the 10% reduction purely on overpayments and not taking into account normal payments?

3. Anything else that may educate me

Thanks in advance!

J

El_Torro

When your mortgage term ends you can overpay as much as you want without penalty when you remortgage. Why not just do that? With an interest rate of 1.49% it makes sense to put what you can into savings and make a lump sum overpayment at the end of the term.

Yorkie1

JJB51 said:

My main concern is ERC's with overpaying the smaller part. I guess I would like to know/understand the following:

1. When/how is the 10% calculated? is it current mortgage balance on January the 1st? So if my balance was 40k on January 1st does that mean up until the end of December I can pay off 4k extra during the year?

2. Is the 10% reduction purely on overpayments and not taking into account normal payments?

3. Anything else that may educate me

Thanks in advance!

J

1. Suggest you look at the terms of your current mortgage to be sure about this. a) I have always been with Nationwide. My earlier products were calendar years with regard to overpayments. Now I am on a yearly cycle that starts on the start date of the new product. b) Some products are 10% of the balance at the start of the payment year. some products are 10% of the original loan (so does not decrease as the remaining balance decreases).

2. Correct. 

Deniseconfused

I have "three" parts to my Nationwide mortgage. On my online account, each part sets out the maximum overpayment for that account, so its clear. 

Mine is also 10% of the original balances  

aussie_in_wales

I have similar but with a different bank. My 5 year fix ends in December. I'm saving but also overpaying each month. I can choose to apply the overpayment to the small part of the mortgage first then if that hits to 10% limit, which it will, the overpayment then automatically overpays the the larger amount. This could be an option with Barclays?
I am also planning to pay off the smaller amount, which currently stands at a little under £12K when the fixed rate ends.