Pay off mortgage

w00519773

My fixed rate mortgage expires in a few weeks.  The balance before i started making recent overpayments was about £30K.

i have six current accounts because I use to take advantage of deals e.g. £100 cash back to open an account or to switch accounts.

I made three overpayments in one day (about £7K in total) recently.  I received three telephone calls from my mortgage provider: First Direct (one for each overpayment) asking questions about the overpayments.

I am planning to make another overpayment in the next few weeks to clear the balance (about £23K).  Is this advisable or is it likely to be more trouble than it is worth?

I am single; I have no children; my work is fairly well paid and I live a relatively conservative lifestyle.  I am using disposable income saved over many years to pay off the remaining balance.

Has anyone else had experience with this? i understand why they are doing it, but wasn't expecting to be questioned so much.  I have made overpayments in the past.

Hoenir

If it saves you money what's the "trouble"?  Mortgage lenders are simply covering their backsides. A regulatorly imposed duty of care for consumers requires something from all parties. 

Brie

The vast majority of people tick along paying the set amount every month and that's what the mortgage providers expect.  For you to suddenly make some large payments would set off a few alarms like "where's the money from? is illegal activity involved?"  Once you've satisfied them it's just spare cash they should be fine.  They might pout a bit about losing some interest income but they know that's part of the game.  

You might mitigate some of the fuss if you warn them it's going to happen.  Same as you might warn the funding bank that you're about to make a large payment to your mortgage.  Keeps them from fussing.

Yes it's worth it.  Saves you money and being mortgage free is rather pleasant.  All that extra cash can start accumulating in your accounts again.

njkmr

Do it.
if you are paying a couple of hundred pounds or even £100 a month in interest on the mortgage and you use your £23k to pay it off then where else can you get that sort of interest? £23k wont generate that sort of money in any account .Its better off saving you money.
You can then start building up your funds again after paying it off.

pjs493

When my husband died last year I made the maximum overpayment allowed on a mortgage he had on a property he rented out. I didn’t clear the balance until Probate was granted because doing it then meant I could avoid the exit fees. I worked out that what I paid in interest while waiting for Probate was cheaper than the exit fees and charges. 

I spoke to the mortgage company over the phone before making the overpayments and the figures weren’t large enough for my bank to be concerned. However, when I came to pay the balance the transaction was stopped and I got a call from my bank’s fraud team. They asked lots of questions, which I was happy to answer, because they just wanted to make sure it was a genuine transaction and not a scam or fraud. For example they asked me if I’d ever visited the property - I had and briefly lived there before my husband and I married and moved with his job. 

The mortgage company were obviously expecting the overpayment because I’d alerted them to the fact that my husband had died and explained that I wanted to reduce the balance, and therefore the interest, by making the maximum overpayments while waiting for Probate. When I received the Grant of Probate I called them again, sent it off in the post, and they sent me the redemption paperwork. I then called and went through the redemption process before ending the call to pay the balance via online banking and then my bank jumped in with a call from the fraud team. 

So long as you keep the mortgage company informed and pre-warn your banks to the planned large lump sum payment, everything should run smoothly. From the perspective of your bank they’ll be most interested in the fraud prevention side of things. The mortgage company may be wanting to ensure a large one off payment won’t impact your ability to pay in the future. They may feel obligated to ensure you’re not putting yourself into financial difficulty by paying chunks off. 

I’m assuming you’re planning to wait until the end of the term to pay off the balance to avoid exit fees. 

Jemma01

Sounds like switching to a tracker is a potential option for you to overpay as much as you want, and not be haggled by a bank that wants you to pay as much interest as they can milk out. Being single with enough cash is the best scenario to pay off a mortgage and focus on your future investments.

BarelySentientAI

Jemma01 said:

Sounds like switching to a tracker is a potential option for you to overpay as much as you want, and not be haggled by a bank that wants you to pay as much interest as they can milk out. Being single with enough cash is the best scenario to pay off a mortgage and focus on your future investments.

Poor advice.

If what you are focusing on is future investments, it often makes sense to keep the mortgage and put the cash towards investments that provide bigger returns than the mortgage interest is costing.  Plenty of other reasons to pay off a mortgage, but it's not what you're suggesting.

It simply sounds like the bank has noticed that it's unusual (to say the least) to suddenly make 3 £7k payments on the same day.  Nothing to do with 'milking interest'.  That could trigger all sorts of money laundering and security checks, particularly without any notice and if something of that size had never happened before.

OP - when the fixed rate runs out, you can overpay to your heart's content.  You don't need to switch to a tracker.  As soon as it expires, tell First Direct that you want a final settlement figure and then pay it.  Very simple.