Mortgages – overpaying

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  • Mortgages – overpaying
  • I’m planning on trying to keep up my pre-interest rate cut payment on the mortgage.

    Can you just ask your mortgage provider to take a certain amount out every month (assuming greater than actual payment required!) or do you need to make other arrangements to do the overpayment?

    Yes, I know I should contact the provider, but it’s a work lunchtime thought so it’s very early on in my thought process!

    Premier Icon wwaswas
    Subscriber

    it depends…

    thing to watch for is how they calculate interest.

    it’s sometimes better to save the money in a savings account and earn interest on it there and then pay the lump sum into the mortgage at the year end as they don’t give you any ‘credit’ in interest terms for paying money in above what you normally do.

    I’d talk to your IFA (if you have one).

    Also, check your mortgage contract – some mortgages have penalties if you overpay and most will only allow you to overpay up to a certain amount each year

    druidh
    Member

    piedi di formaggio – Member

    Also, check your mortgage contract – some mortgages have penalties if you overpay and most will only allow you to overpay up to a certain amount each year

    Wot he said. As above – consider some sort of investment vehicle.

    Gary_M
    Member

    check your mortgage paperwork – it will say in there. But there is no general rule as it depends on what deal you’re on, I can pay up to 10% of the capital without any penalties. But yes you can ask them to take x amount every month from your bank account.

    gnarlynath
    Member

    I’m on a flexible tracker 2.34% at the mo. The Mortgage provider takes the standard payment and I over pay manually each month depending on how rich I feel / what bike bits I need. I have the mortgage account numbers and pay straight into that as I would to another bank account.
    I’m on daily interest but payment only accepted at start of month so no point paying half way through a month.
    I can overpay up to a certain percentage but unlikely to go near that.
    I can at any point request all my overpayments back. Which is kinda nice of them should I suddenly need a few quid but it’s subject to interest / charges etc.

    bigsi
    Member

    Some lenders also have a minimum overpayment amount for example on some Abbey contracts you can overpay by upto 10% of the outstanding balance without penalty in any one year but the minimum overpayment amount at any one time is £500 and it has to be made over the counter at your local branch.

    Some lenders are alot more flexible as per above.

    In short i would always advise a client to contact the provider direct unless as their advisor i was certain as to how overpayments could be made.

    Premier Icon chakaping
    Subscriber

    Halifax let me overpay up to 10% of remaining value per 12-month period, before penalties.

    Difficult to work out how much you can actually overpay at any given time, even they have to go away and work it out then send us a letter.

    AGain like everyone has said above about checking with your mortgage company. However at present with the dire financial straights everyone is in it’s worth over paying as your savings will be getting diddly squat in interet and remember you get taxed on those savings (unless it’s ISA) so anything to stop the bleeding taxman taking my pennies!!

    My new mortgage I’m about to get allows me to over pay unlimited, no catches .. I spent about 10 mins on the phone to the woman saying "but there MUST be a catch, this is too good to be true and there’s no such thing as that in this job so what’s going on" …. no read the small print and it is as good as it looks!!!

    gusamc
    Member

    As above – read the small print/ ask questions and get written answers.

    If you want to overpay look at offset mortgages – I’m with IF, works fine for my circumstances.

    Premier Icon white101
    Subscriber

    My payments have dropped £175 in the last few months, so I went into the local Barclays and they just accept cash amounts from me and it gets taken off the balance next day.

    When rates where high it might have been worth putting the cash in an account and saving up the interest, but really whats the point when rates are so low…pay it off now and get the bills down for the future.

    Most trackers tend to have unlimited amounts, fixed etc tend to be 10% of mortgage balance without any penalties.

    If you pay off £100 per month extra its worth around £1400 when you chuck on the interest saving

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