Rate Switch - Affordability checks?

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katie4
katie4 Posts: 430 Forumite
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Our fixed term is coming to an end and we are going to be staying with our current provider but would like to reduce the term, would an affordability check be needed for this?

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  • Spangled
    Spangled Posts: 193 Forumite
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    I *think* a reduction in term would trigger an affordability check. But check with a broker and/or your current lender.

    But could you not stick to your current term and just overpay to the level of the payments due on the shorter term? That way you are only contractually obliged to meet the lower payments (useful if cashflow becomes tight). It requires you to be disciplined to make those overpayments though.

    Of course, it does also depend on exactly how many years you are looking to shorten your term by and the limits on how much you can overpay by each month.
  • katie4
    katie4 Posts: 430 Forumite
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    Spangled wrote: »
    I *think* a reduction in term would trigger an affordability check. But check with a broker and/or your current lender.

    But could you not stick to your current term and just overpay to the level of the payments due on the shorter term? That way you are only contractually obliged to meet the lower payments (useful if cashflow becomes tight). It requires you to be disciplined to make those overpayments though.

    Of course, it does also depend on exactly how many years you are looking to shorten your term by and the limits on how much you can overpay by each month.

    Thanks we are not able to overpay (its in their t&cs - yes i know it is unusual but we have checked and double checked and this is the case)


    our monthly payments would stay roughly the same as what they are now which is good and we would be looking to reduce it by 5 years
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Don't any of your lenders current products allow overpayments to be made?
  • katie4
    katie4 Posts: 430 Forumite
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    Thrugelmir wrote: »
    Don't any of your lenders current products allow overpayments to be made?

    at the moment we have been told max 10% but min of 3x monthly amount (or £1k which ever is more) but we cant afford that upfront we were looking at paying £150-300 extra as over pay
  • Penelopa.Pitstop
    Penelopa.Pitstop Posts: 1,145 Forumite
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    So save for a couple of months and overpay in chunks.
  • prudential
    prudential Posts: 17 Forumite
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    katie4 wrote: »
    at the moment we have been told max 10% but min of 3x monthly amount (or £1k which ever is more) but we cant afford that upfront we were looking at paying £150-300 extra as over pay

    I believe you've misunderstood. I don't think there is a minimum needed for overpayments... you should be able to overpay by as little as £1 or 1p each month if that's how much you want to/can afford to overpay, up to a max of 10% without incurring penalties.

    Payments that are less than 3x your monthly repayment or less than £1K will be treated by your lender as overpayments.

    Payments that are higher than that amount (higher than £1k or 3x your monthly payments) at will be treated by your lender as capital repayments..



    PS. I'm not a broker, this is just my humble knowledge... just an example, not sure who your lender is but they will have a similar policy...

    https://www.coventrybuildingsociety.co.uk/consumer/help/mortgages/repaying-my-mortgage/paying-more.html
  • katie4
    katie4 Posts: 430 Forumite
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    prudential wrote: »
    I believe you've misunderstood. I don't think there is a minimum needed for overpayments... you should be able to overpay by as little as £1 or 1p each month if that's how much you want to/can afford to overpay, up to a max of 10% without incurring penalties.

    Payments that are less than 3x your monthly repayment or less than £1K will be treated by your lender as overpayments.

    Payments that are higher than that amount (higher than £1k or 3x your monthly payments) at will be treated by your lender as capital repayments..



    PS. I'm not a broker, this is just my humble knowledge... just an example, not sure who your lender is but they will have a similar policy...

    https://www.coventrybuildingsociety.co.uk/consumer/help/mortgages/repaying-my-mortgage/paying-more.html



    Nope this was their reply when i asked about overpayments


    capital payment must be either 3 times payment or £1000 whichever is the greater. with a limit of 10% of the balance. for example you couldn't pay £10 as an overpayment


    lender is monmouthshire building society
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