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What are the minimum repayments on a mortgage per month allowed?

barneybeagle
Posts: 138 Forumite


I am just over one year into a Northern Rock 5 year term repayment mortgage. To pay off the mortgage early would encounter a penalty fee totalling around 3K.
To get round this is it possible to pay back the bulk early then pay eg. £1.00 per month back until the end of the five years therefore technically not paying back the full amount early and not getting penalised for it. Do the banks state a minimum that has to be paid per month?
Just wondering if this is possible? Any assistance as ever is most appreciated. If you are wondering, I'm looking at cashing in my endowment which to my calculations and as long as I'm working should allow me to pay off my mortgage within the period. Obviously I don't want to encounter a 3K penalty fee.....
Cheers
BB
To get round this is it possible to pay back the bulk early then pay eg. £1.00 per month back until the end of the five years therefore technically not paying back the full amount early and not getting penalised for it. Do the banks state a minimum that has to be paid per month?
Just wondering if this is possible? Any assistance as ever is most appreciated. If you are wondering, I'm looking at cashing in my endowment which to my calculations and as long as I'm working should allow me to pay off my mortgage within the period. Obviously I don't want to encounter a 3K penalty fee.....
Cheers
BB
0
Comments
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Are you allowed to make overpayments, if so pay back all the mortgage apart from a few quid until your deal expires.
Back in the old days of paper deeds it used to be common practice to pay the mortgage off apart from a pound so that the lender would keep your deeds safe for you0 -
Hello mate, thanks for the reply. Yes we are making overpayments and what you suggest is what I am intending.
My question is can you still do this? ie pay off the bulk of the mortgage which will then leave the remaining months paying a minimum amount until the mortgage term is up and therefore saving myself a penalty fee if I was to pay the lot off early.
Cheers
bb0 -
If you've still got your mortgage agreement have you looked through that?
In a year my mortgage only allows me to make overpayments to the value of 10% of the capital outstanding at the beginning of the year (so if the mortgage balance was say £100K at May, I can only make overpayments totalling £10k until the next April), otherwise there's a hefty penalty fee :eek:
Happily :rolleyes: that's not an issue for me! :rotfl:0 -
What you're proposing won't get around the early repayment charges.0
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I am on a 15 year fixed mortgage with northern rock, my terms allow me to overpay as much as I want without penalty (without paying off balance).
I asked them the question that the op has posted.
The answer they gave me was:
Overpay to the point of only having a nominal amount (£1) then just suspend payments until the last payment of your mortgage is due.
Or, I could pay as low as £20 per month but it was me that said this figure, they said I could pay less if I wanted.Money saving newbie but learning fast:D0 -
barneybeagle wrote: »I am just over one year into a Northern Rock 5 year term repayment mortgage. To pay off the mortgage early would encounter a penalty fee totalling around 3K.
To get round this is it possible to pay back the bulk early then pay eg. £1.00 per month back until the end of the five years therefore technically not paying back the full amount early and not getting penalised for it. Do the banks state a minimum that has to be paid per month?
Just wondering if this is possible? Any assistance as ever is most appreciated. If you are wondering, I'm looking at cashing in my endowment which to my calculations and as long as I'm working should allow me to pay off my mortgage within the period. Obviously I don't want to encounter a 3K penalty fee.....
Cheers
BB
Only if you can do so by 'overpayments' within the T&C of the original mortgage offer.
If you simply pay off, for example, 95% of your outstanding balance then you will be subject to 95% of the full ERP. If you read the T&C carefully it will state that the penalty is payable for full or partial early repayment outside of the agreed and allowable overpayment limits (usually 10% of the outstanding capital per year). Even doing this on a 5 year fixed rate will mean that you are only able to repay approx 40% of the total balance over 5 years using overpayments without penalty as follows (assuming £100,000 mortgage)
Yr 1 Balance £100,000 Overpay £10,000
Yr 2 Balance £90,000 Overpay £9,000
Yr 3 Balance £81,000 Overpay £8,100
Yr 4 Balance £72,900 Overpay £7,200
Yr 5 Balance £65,610 Overpay £6,510
Final Balance after 5 yrs overpayments to the max (assuming 10% is allowed) £59,049. This also assumes you are on Interest Only with no additional capital repayment reduction being made (apologies if this is not the case but am merely trying to help here).
Lets say that you wanted to make the full reduction within year 1 leaving a smal balance of, say, £1,000. Again assuming the £100,000 mortgage balance, the figures would pan out like this:
Balance £100,000
Reduction £99,000
Overpayment allowance (10% assumed) £10,000
Remainder £89,000 paid off outside that year's overpayment allowance.
You would then be liable for the ERP on the £89,000.
Be careful, speak to the lender and check your original paperwork very thoroughly before taking any action.
Andrew0
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