10% Overpayment calculator

Calzor_Suzay

I'm trying to work out how you calculate the 10% over payment limit.
Trouble with googling this is I get twenty different sites telling me what that will achieve but I'm trying to work out just how much the 10% is as all (nearly all) lenders will start to hit you with early repayment fees.

What is the 10% of...
Is it 10% per year?
Are there any online calculators or downloadable Excel sheets?
Ideally I'd just like to chuck in the Amount borrowed, term, rate and it'll say "Hey you could pay £4k over and above your monthly repayments in a year before you get hit by an ERC"
I don't need it to work out what effect that has on the mortgage I have a spreadsheet that does that.

Mr.Generous

If your talking about the overpayment on a mortgage to repay quicker it's 10% of the original sum borrowed. So if you borrowed £100k you can overpay 10k per year regardless of the remaining balance.

BarelySentientAI

Mr.Generous said:

If your talking about the overpayment on a mortgage to repay quicker it's 10% of the original sum borrowed. So if you borrowed £100k you can overpay 10k per year regardless of the remaining balance.

Please do not trust this advice without checking the T&Cs of your mortgage deal.

Whilst it might be true for some lenders, it is by no means universal and could get you hit by early repayment charges.

Each lender has their own rules, check the documents that refer to your own lender and your own mortgage deal.  If you can't put your hands on them, check the website of your lender to see what they say.

Some are 10% per year of original balance.  Some are 10% per year of the balance on a particular day each year (often the anniversary of the deal starting).  You have to look it up.

Calzor_Suzay

Ok thanks both, at least I have a rough idea to work on.
Most lenders seem to give vague guidance from my further googling saying refer to your documentation (great I don't have any yet) but it may play into my decision on lender but Halifax states it's pretty much 10% of the beginning balance as at 1st Jan and then annually.

So in summary it's of the amount you borrowed but ask the lender for specifics.

Hoenir

Calzor_Suzay said:

Halifax states it's pretty much 10% of the beginning balance as at 1st Jan and then annually.

Very much how the majority of lenders work. 

Be carefull not to incur ERC's by exceeding the annual allowance. 

BarelySentientAI

Calzor_Suzay said:

 Halifax states it's pretty much 10% of the beginning balance as at 1st Jan and then annually.

So in summary it's of the amount you borrowed but ask the lender for specifics.

Well that doesn't sound like "the amount you borrowed" to me, at least not as bluntly as you write it there - more like "the amount left from what you borrowed".

The Halifax FAQs wording says:

"At the moment we allow you to overpay up to 10% of the amount you owed on the 1st January within that calendar year, without having to pay an early repayment charge.

For example, if your mortgage balance was £100,000 on the 1st January, you could over pay £10,000 (i.e. 10% of £100,000) that year without being charged any fees."

 When you get to the next 1st January, the balance is no longer £100,000 (it would be less), so you could not over pay £10,000 in that next year (it would be 10% of the new lower balance).

BikingBud

Calzor_Suzay said:

Ok thanks both, at least I have a rough idea to work on.
Most lenders seem to give vague guidance from my further googling saying refer to your documentation (great I don't have any yet) but it may play into my decision on lender but Halifax states it's pretty much 10% of the beginning balance as at 1st Jan and then annually.

So in summary it's of the amount you borrowed but ask the lender for specifics.

Your decision should also take into account how the lender may treat overpayments, both lump sum and fixed monthly. Reducing payments and reducing term whilst both reducing interest payable do not provide the same level of benefit.

Taking only the mortgage into account, if you wish to overpay and minimise the interest you pay, then being able to reduce the term by continuing to pay a fixed repayment amount is key, whereas overpaying and then reducing the monthly payment and retaining the original end date will not provide as significant a saving.

That said having the money work elsewhere may provide more growth than the potential mortgage interest savings. 

Also consider if saving and paying off lumps, saved via other means as above, between fixed rate agreements might be the best solution.

So do not accept vague guidance. I would very strongly recommend that not only do you consider the bold interest rate being flashed to attract you but that you investigate and understand the overpayment mechanism for each potential provider and ensure it meets your anticipated circumstances and longer term requirements.

An excellent resource: Index.html download and have a play.

Edi81

Who is your lender?
they are all slightly different. If in doubt give them a call

tacpot12

Edi81 said:

Who is your lender?
they are all slightly different. If in doubt give them a call

Try to get them to put their answer in writing via email so that if it turns out to be wrong, you have an basis to argue that you shouldn't pay any ERC.

amnblog

Where lenders offer a 10% overpayment allowance they mean a maximum of 10% of the balance overpaid in a year.

Therefore, for a balance of £100,000 maximum overpayment would be £10,000 over 12 months.

What is the balance?

For most Lenders it is the outstanding balance at the start of the 12 month period.
For some, it is the original amount borrowed on day one

What is the 12 month period

For most Lenders it is the calendar year.
For some, it is the anniversary of the mortgage being taken out, or the new product rate starting.

If you would like to tell us which Lender you have we may be able to clarify.

Calzor_Suzay

Thanks all, I have no lender yet as investigating options but It's part of my weighing up the pros and cons and what I can't can't do/afford etc.

Once I have a better idea I may come back