Overpayment Question

vo-vo

Hi,

I'm interested to start overpaying.. but still not exactly clear about few things.

Situation :
Mortgate of £155,700, started with Halifax April 2007, fixed term until February 2009, rate at 5.19% for 25 years with possible 10% of overpayment.

After 1 year continous payment of £923.66 per month, the current amount is £153,000.

Question :
1) If I pay in £15,300 (10%) lump sum today, I will also have to change the current term to a shorter term - am I right? Will I get charged for this?

2) If I am still interestered to overpay each month, I assume that I will again be charged, since the 10% allowance has been used? How much roughly will I be charged and is it worth to increase my monthly payment?

Thanks for all the motivating posts here!! :T

Welshlassie

Can I clarify you have a 25 year mortgage with a fixed rate of 5.19% until Feb 09? Am I right?

You won't have to reduce your term it will just automatically happen. You do need to ensure that when you pay the overpayment you ask for it to be taken off the capital not the interest though otherwise you won't get the full benefit.

If you continue to overpay after paying your 10% then yes you will be charged. If will depend on your mortgage how much this will be, but you may find it will be a % of the total eg 2% as an early repayment charge. The alternative would be to save up your additional overpayments in a savings account with a higher rate of interest than the mortgage so above 5.19% after tax (I think Barclays have an ISA at 6.5% presently) and then use the amount saved to overpay in 12 months time if you still want to.

vo-vo

Welshlassie wrote: »

Can I clarify you have a 25 year mortgage with a fixed rate of 5.19% until Feb 09? Am I right?.

Yes thats correct.

Welshlassie wrote: »

You won't have to reduce your term it will just automatically happen. You do need to ensure that when you pay the overpayment you ask for it to be taken off the capital not the interest though otherwise you won't get the full benefit.

I was told that I can pay directly into the account via bank transfer, do I have to inform them about this?

Welshlassie wrote: »

If you continue to overpay after paying your 10% then yes you will be charged. If will depend on your mortgage how much this will be, but you may find it will be a % of the total eg 2% as an early repayment charge. The alternative would be to save up your additional overpayments in a savings account with a higher rate of interest than the mortgage so above 5.19% after tax (I think Barclays have an ISA at 6.5% presently) and then use the amount saved to overpay in 12 months time if you still want to.

If I overpay the lump sum now up to 10%, and reduce the term further, that will basically increase the amount of monthly payment. Does it count towards overpayment too? Or is this just a normal repayment due to change of term?

Thanks.

Welshlassie

vo-vo wrote: »

Yes thats correct.

I was told that I can pay directly into the account via bank transfer, do I have to inform them about this?

If I overpay the lump sum now up to 10%, and reduce the term further, that will basically increase the amount of monthly payment. Does it count towards overpayment too? Or is this just a normal repayment due to change of term?

Thanks.

If you pay in by bank transfer just have a chat with them before hand and tell them you want the capital paid off not the interest on all overpayments. You shouldn't have to then notify them everytime you pay in.

If you overpay and then actually arrange for the term to be shortened so your monthly repayment goes up, this would be your new fixed monthly payment, you might me charged to do this, but it wouldn't count as an overpayment and if you needed to increase the term again to reduce your payments for whatever reasons you would be charged again and it might reflect badly on your credit record.

Hope that makes sense, feel free to ask more questions and we'll see what we can do about answering them.

baffcat

Why not phone Halifax and ask them? Take a note of the person's name to whom you speak, and ask for confirmation of anything you're told in writing. You'll get definitive answers instead of assumptions from us.

Baff