Want to overpay but really confused

Biggish_who

Will probably need to speak to a mortgage advisor as I'm quite clueless but wanted to get some initial ideas if I'm able to.

Have a smallish mortgage on a flat (live in, not buy to let) and come to end of cheap fix in November. 

I'm hoping to make an overpayment soon to help with the inevitable increase in interest cost.

I'm sure my provider (Virgin) allow the usual 10% /year. But I'm not really sure what that equates to.

Is it 10% of the monthly payment? Or 10% of the remaining balance per year?

Totally made up figures here but let's say the mortgage was £100k. It's now been nearly 5 years and the balance is now £80k. 

Does that mean I can pay £8k this year? 

When does the 'once per year' start and end? And is it 10% of the balance at the start of the year or the end of the year? 

Sorry, I know these are all noob questions, but I can't find the answers online. 

Any input very gratefully received! 

BarelySentientAI

Biggish_who said:

I'm sure my provider (Virgin) allow the usual 10% /year. But I'm not really sure what that equates to.

Is it 10% of the monthly payment? Or 10% of the remaining balance per year?

It entirely depends on your mortgage, not even just on the lender.

Some are % of remaining balance at the start of the calendar year, some are % of remaining balance at the start of the mortgage year (like the anniversary of starting it), at least one is % of the original balance at the start of the mortgage.

Do you have the documents from when you took the fix?

Brie

I'm fairly certain it is NOT the monthly amount but either the starting amount or the current balance.  So £10k or £8k in your scenario.  And I think (but don't quote me) the "once a year" is on a rolling 12 months.  

I'm wondering if you're allowed to pay an extra amount on a remortgage.  Something else to ask the mortgage provider.  

Biggish_who

BarelySentientAI said:

Biggish_who said:

I'm sure my provider (Virgin) allow the usual 10% /year. But I'm not really sure what that equates to.

Is it 10% of the monthly payment? Or 10% of the remaining balance per year?

It entirely depends on your mortgage, not even just on the lender.

Some are % of remaining balance at the start of the calendar year, some are % of remaining balance at the start of the mortgage year (like the anniversary of starting it), at least one is % of the original balance at the start of the mortgage.

Do you have the documents from when you took the fix?

Oh dear, I didn't realise it was all that complicated. 

I do have some paperwork from when I first took out the mortgage, but that was actually 7 years ago because I took a 2 year fix first, then when that expired they offered me a new rate for 5 years so I took that. 

I don't recall there being any documents when I took the second fix.  But I'll trawl through what I have in case it is in there. 

If it is not there, will they tell me over the phone?

Also I understand I have to call them and request that my overpayments are actually classed as overpayments, and they do not simply take them in place of my usual direct debits? 

Thanks for replying too.  

Bluebell1000

When I had a similar question to our mortgage provider, they were able to help on a live chat, which I suspect was faster than trying to call them!

Biggish_who

Bluebell1000 said:

When I had a similar question to our mortgage provider, they were able to help on a live chat, which I suspect was faster than trying to call them!

Thanks for the tip.  I'll check out whether Virgin do a live chat next time I get chance. 

pjs493

Ring your mortgage provider, they’ll be able to tell you. Some mortgage companies will also issue an annual statement, do you have yours? It should tell you when your year starts and ends and how much you can overpay within that year. 

Biggish_who

Hi

pjs493 said:

Ring your mortgage provider, they’ll be able to tell you. Some mortgage companies will also issue an annual statement, do you have yours? It should tell you when your year starts and ends and how much you can overpay within that year. 

Thanks yes I do have those statements, I was just looking at them.  It does have the year start / end (at least what I think it is), but I cannot find any information about how much can be overpaid. 

I think it will be necessary for me to contact the provider. 

BarelySentientAI

Google suggests that Virgin are (at least on some products that they label as "Everyday Mortgages") in the 10% outstanding balance and calendar year camp.



It should be on the offer document for the 5 year deal - and you should have had one of those (although it could be online only).

Biggish_who

I found the below information on my original mortgage offer from virgin (but this was before I renewed with them after the initial 2 year rate fix).  Does anyone know if this will still apply? 

---

 During the Early Repayment Charge period you are allowed to make overpayments of up to 10.00% of the outstanding balance in each calendar year without incurring an Early Repayment Charge. In the year that your mortgage product commences, the 10.00% allowance will be calculated from the original loan balance. In subsequent years, the 10.00% allowance will be calculated from the balance as at the 31st December of each calendar year.

If, during the Early Repayment Charge period, you make overpayments of more than 10.00% of the outstanding balance in any calendar year, an Early Repayment Charge will be payable on the amount repaid that is in excess of the 10.00% allowance.

For example, if your outstanding balance was £100,000.00 at 31st December, you would be entitled to make overpayments of up to £10,000.00 in the next calendar year without incurring an Early Repayment Charge. If you overpaid by £12,000.00 in that year, you would be charged an Early Repayment Charge on the £2,000.00 that is above the annual allowance.

Please note that the annual 10.00% overpayment allowance cannot be carried forward from one calendar year to the next.

Following receipt of an overpayment, your outstanding balance and the interest charged will be recalculated with immediate effect.

 Please note that for an overpayment made by cheque, interest is adjusted two business days after we process the cheque.

If you make an overpayment by Direct Debit, or an overpayment of less than £500.00 by another payment method, your contractual monthly payment will not be recalculated.

However, if you make an overpayment of £500.00 or more, by a method other than Direct Debit, your contractual monthly payment will be recalculated. We will write to you to confirm your new contractual monthly payment, which will apply from the first of the following month.

If you wish to leave your monthly payment unchanged to further reduce your outstanding mortgage balance, you will need to contact us to set up a payment arrangement. Any payment arrangement currently applied to your account will be unaffected.

To make a regular monthly overpayment to reduce your outstanding mortgage balance, you will need to contact us to set up a payment arrangement.

There are no restrictions on making overpayments after the Early Repayment Charge period has ended.

penners324

Virgin Mortgages are 10% of outstanding amount on 1st January each year.