Halifax Overpayment - £10 fee?

fpa_2

I have a 2-yr fixed rate mortgage with Halifax and decided to make some overpayments. Before doing it, I discussed it with one of their advisers and I was asked whether I wanted my monthly payment to remain the same. I said yes, then overpaid by almost 10% of the mortgage (their penalty-free limit is 10% pa), but today I got a letter saying that my monthly payment will be reduced by ~£100.

I rang them again and said I prefer my monthly payment to remain the same and they told me that to do that I would have to pay an admin fee of £10 and that I would have to pay this every time I made an overpayment and wanted to keep the same monthly payment, because the mortgage term will be reduced.

Can they do that and is that `fair` and should I do it? The advisor I first spoke to, had never mentioned anything like that.

Thanks for any help.

KTF

I overpay my Halifax mortgage whilst keeping the monthly payment the same and have never been charged (nor seen a mention of) the £10 fee.

Ian_Griffiths_Halifax

fpa. Look in your original mortgage offer document and make sure that you have not exceeded the maximum annual overpayment. It may be that you paid a lump sum of 10% of your original mortgage, but the balance WILL have reduced by something if you have a repayment mortgage as that is the nature.

It could be that you have overpaid by a lump sum of more than 10% of the current balance, or very close, and so the overpayments through leaving your payments the same will take you over the maximum permitted per annum and £10 would be the 'redemption penalty' per overpayment.

money_maker_3

Thats not how our overpayment fee works, if it was because you had gone over the 10% allowance, you would be charged quite a bit more than £10. The reason the £10 is charged is because now your debt has decreased, if you kept paying the same amount each month you would go over your 10% allowance, so the term has to be decreased to allow you to keep paying the same without being penalised. So in effect you are being charged £10 for a term amendment to save you hundreds or thousands of fees in going over your 10% allowance.

Noz

Yes, you being charged to amend your term not specifically to overpay.

fpa_2

Thanks for the replies.

I checked and have overpaid ~9.7% for this year so I haven't exceeded my 10% annual allowance.

I guess the last two posters are right and the £10 fee is because the term is reduced, so I will have to pay it. What I wonder though is how KTF is able to overpay without the fee, is it because your overpayments are much lower than that? (compared to the maximum annual allowance)?

KTF

I am overpaying 50% of my normal monthly payment which adds up to just under 4% of the total amount borrowed per year so I am well within the 10% limit.

I pay the amount via standing order each month using the details supplied by the Halifax. I do get sent a letter when the BoE rate changes but as I am on a 5 year fixed rate the monthly payment it quotes does not change as a result.

Noz

That would suggest that KTF's term is not being reduced with each overpayment hence no £10 admin fee

nobblyned

fpa wrote: »

Thanks for the replies.

I checked and have overpaid ~9.7% for this year so I haven't exceeded my 10% annual allowance.

I guess the last two posters are right and the £10 fee is because the term is reduced, so I will have to pay it. What I wonder though is how KTF is able to overpay without the fee, is it because your overpayments are much lower than that? (compared to the maximum annual allowance)?

Or could save the difference between the new payment and the old payment till the end of the year and use that as an overpayment also. Effectively paying the same monthly pro rata, and avoiding the fee.

fpa_2

nobblyned wrote: »

Or could save the difference between the new payment and the old payment till the end of the year and use that as an overpayment also. Effectively paying the same monthly pro rata, and avoiding the fee.

I think that's a good idea but I was planning to overpay by near 10% next year anyway and since the fee is only £10, I'll probably pay it.

alibongo42

I got my mortgage statement from Lloyds TSB this week, and the accompanying leaflet detailed a list of things they could possibly charge me for.

I noticed that a £10 fee has been introduced (from 1st Jan 08) for making overpayments and using this to reduce the monthly payment or term.

It's definitely new, because I made an overpayment and reduced the term in December, without incurring this fee.