Please can someone explain to me about Halifax overpayments

mylifemyrules

Hi, 

I just wondered if someone could explain if I am still benefiting if overpaying to Halifax when they just reduce my monthly payments? I assume the capital does go down? I can't remortgage for 10 years so wanted to make sure I am still doing the right thing?

I've looked at the mse overpayment calculator but not sure if it's accurate if the term doesn't change. Surely if the capital goes down it will naturally end? Sorry I'm just so confused. 

Hoenir

Some lenders will have a policy to adjust monthly payments when certain situations occur. For example these could be a sizable large single overpayment is made or at a change of interest rate. As the lender's systems will revise payments to ensure that the mortgage is repaid over the agreed contractual term. 

When your monthly repayment reduces and you can afford to pay more ( while remaining within any annual allowance). Do so. As reducing the capital balance owed will reduce the amount of interest you are charged every month. You'll end up clearing your mortgage sooner. Settling a mortgage early for most people is akin to moving a mountain. A long term project. 

mylifemyrules

Thank you 

RelievedSheff

Assuming you have not reached the 10% overpayment limit then you can just increase your monthly repayment again.

This is what we do. Halifax review our repayment every May and then we increase it again so that it still includes the same overpayment.

Takes a few minutes on your online account to reset the repayment.

mylifemyrules

RelievedSheff said:

Assuming you have not reached the 10% overpayment limit then you can just increase your monthly repayment again.

This is what we do. Halifax review our repayment every May and then we increase it again so that it still includes the same overpayment.

Takes a few minutes on your online account to reset the repayment.

No I haven't. Thank you. Do you happen to know what Halifax do with lump sum overpayments? 

Hoenir

Halifax's Guide can be found here

https://www.halifax.co.uk/mortgages/existing-customers/make-a-lump-sum-overpayment.html

amnblog

Your standard monthly payment is based on targeting the mortgage reducing to zero in the final month of your remaining mortgage term.

If you overpay, the capital is reduced faster and therefore the interest charged reduces (Halifax say -"we stop charging interest on any amount you overpay by on the day we receive the payment") .

Halifax then periodically adjust the standard monthly payment down to suit the new balance (the regulator encourages them to do this rather that keep charging at the original payment level).

If you keep overpaying, you are reducing your capital faster so you will have a much reduced cost to your mortgage.

If that does not suit you - and you want to Halifax to formally shorten the term of your mortgage increasing your standard monthly payment - they can do so as part of the process when you swop rate.

mylifemyrules

amnblog said:

Your standard monthly payment is based on targeting the mortgage reducing to zero in the final month of your remaining mortgage term.

If you overpay, the capital is reduced faster and therefore the interest charged reduces (Halifax say -"we stop charging interest on any amount you overpay by on the day we receive the payment") .

Halifax then periodically adjust the standard monthly payment down to suit the new balance (the regulator encourages them to do this rather that keep charging at the original payment level).

If you keep overpaying, you are reducing your capital faster so you will have a much reduced cost to your mortgage.

If that does not suit you - and you want to Halifax to formally shorten the term of your mortgage increasing your standard monthly payment - they can do so as part of the process when you swop rate.

Thank you for this information!