Overpaying Tandem 2nd Charge Mortgage not making a difference?

Gginge1982

We took out a loan to consolidate our debts a few years ago. Knowing the payments being made were not really making a dent in the principle amount we are now in a position to heavly over pay, We are wanting to do this for 2 reasons. 1 to reduce the over all interest paid and 2 to clear the debt as quickly as possible.

When we took out the debt we were told we could over pay and there would be no issue.

We have tried to make a first payment and it was refused, we have since called the company to be told the following:

You can make an over payment but as discussed it will sit on the account as a credit until the fixed rate ends, once the fix rate ends we can then apply the credit to reduce the term of the loan. 

For the first 299 months, your monthly instalment will be £324.80, with a final payment of £324.80. If you have chosen to pay any applicable fees upfront rather than adding them to the loan (as detailed under “Costs to be paid on a one‑off basis”), these fees will be added to your first monthly instalment.

After 5 years, your fixed rate period will end and, assuming the Lender Base Rate remains unchanged, your monthly instalment will remain £324.80.

Please note that the interest rate on this second charge mortgage loan can change, which means your instalments may increase or decrease. For example, if the interest rate were to rise to 17.00% p.a., your monthly payments would increase to £534.65.

So, as I read this there is no benefit to paying them at all and in fact they will not take the overpayments into consideration until the end of the fixed term next July. This won't reduce the principle so we'll be charged the full interest until then.

I was planning on having it all paid by September this year but I may be looking at an additional cost of £4k

Is this legal as I have not had this with anywhere else and If I can get out of it how can it be done.

Should I be taking this to the ombudsman?

Isthisforreal99

What does your loan agreement say about overpayments?

BikingBud

https://forums.moneysavingexpert.com/discussion/6664128/overpaying-tandem-2nd-charge-mortgage-not-making-a-difference

You have the funds for complete payment of the loan?

There is an Early Repayment Charge clause in the contract?

If you settle the whole loan in Sep 2026 you will be billed an extra £4k as a result of the ERC? I am assuming the loan is ~£100k and work the ERC to be roughly 4% .

How much interest will you pay if the loan runs full term? Or runs to end of ERC period - 5 years?

The ERC even if a higher charge might be a better offer as it gives you freedom, only you can tell.

Can you get a better rate, ie generate more interest by saving the funds you have to pay off the loan, in any other vehicle, pension, S&S ISA, cash ISA, between now and end of ERC period?

Gginge1982

Hi Loan was 37K and 9.71%

Full term is ridiculous interest @ £60K full term if that rate stayed the same as was always going to pay off sooner.

Gginge1982

I have found the original paperwork on application noting payments will be deducted immediately. I think a complaint is in order here!

ManyWays

https://forums.moneysavingexpert.com/discussion/comment/81962896#Comment_81962896

Well done for looking this up, too many people just accept what they are told is correct.

Send your complaint to

complaints@tandem.co.uk

and send it to the Financial Ombudsman if Tandem reject it.