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Want to be Mortgage free

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Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%
Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?

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  • TheSpectator
    TheSpectator Posts: 862 Forumite
    500 Posts Name Dropper
    edited 5 November 2024 at 3:43PM
    Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%
    Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?
    Depends on the lender. Pretty sure Halifax base the 10% on the balance on 1st January balance each year.

    At 3.99% you would be better investing your overpayments in savings accounts, 5% rates widely available.
  • penners324
    penners324 Posts: 3,511 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper
    Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%
    Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?
    Yes. So put the remainder into a savings account. 
    I've gone for Coventry BS triple access saver.

  • penners324
    penners324 Posts: 3,511 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper
    Mortgage has 10 year 11months to run.  Just fixed for 5 years at 3.99%
    Plan is to over pay and be mortgage clear in 5 years.  Mortgage is £760.00 / month over payment of £650.00.  I’m only allowed to make overpayments of 10% each year, does this mean my overpayments will need to be reduced accordingly as the mortgage capital reduces?
    Depends on the lender. Pretty sure Halifax base the 10% on the balance on 1st January balance each year.

    At 3.99% you would be better investing your overpayments in savings accounts, 5% rates widely available.
    Which is fine while savings rates are above that figure. When they drop below it can cause all those savings built up being in the wrong place.
  • amnblog
    amnblog Posts: 12,728 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    With most Lenders yes, 10% of the remaining balance. An exception would be a Lender like Nationwide who base the 10% limit on the original balance.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Bigphil1474
    Bigphil1474 Posts: 3,546 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    OP, the 10% overpay limit only applies whilst you are within the fix deal - so basically for the next 5 years. If you can get a savings account which pays more than the 3.99% then you should put the overpayment in there. However, that's still a small gamble as if the interest drops you can't get the 10% overpayment period you haven't used back. If you can afford to lock that money in, you might have a better chance of getting a higher interest over the next 5 years. 

    The easiest solution is to overpay monthly as it involves less messing around, but yes, if your fix says it's 10% of the outstanding balance, then you would have to calculate what you can overpay each year which will get lower. Put the rest into savings , and pay off the full balance at the end of the 5 year deal.
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