Mortgage overpayment - best time

[tali1]

On a very new 3 yr tracker at 4.1%- been told with low rates it is best time to overpay- but had a word with my (trusted) broker and he was rather moot about it "if you can afford to overpay then do so regardless of rates"
So is overpayment wholly dependent (ie best when rates are very low?
And which will be strictly financially worthwhile quids in , lump sum or monthly?
(Any overpayment will be a lump sum to reduce amount rather than term btw)
Thanks

[Cactussed]

You will have a maximum repayment amount so check that first.
Otherwise, if its just a set amount you plan to set aside each month, then it depends on your risk appetite. Paying off the mortgage is effectively a guaranteed 4% after tax return on investment versus the uncertainty of investing.

You may be better to plough everything you own into the FTSE over the next 3 years then use the resulting balloon to repay a lump sum at the end of the tracker.

It all depends on your view of probable returns on investment over the short to medium term. At the end of the day, is just a matter of doing the maths.

The only other consideration is your ability (or lack of) to redraw on the mortgage. Investing gives you liquidity should you need it which is always worth something.

[Dupont666]

how does one find out if they have a redemption fee?

[scotal]

tali1 said:

On a very new 3 yr tracker at 4.1%- been told with low rates it is best time to overpay- but had a word with my (trusted) broker and he was rather moot about it "if you can afford to overpay then do so regardless of rates"
So is overpayment wholly dependent (ie best when rates are very low?
And which will be strictly financially worthwhile quids in , lump sum or monthly?
(Any overpayment will be a lump sum to reduce amount rather than term btw)
Thanks

This is the broker that set up the mortgage right?
So when you spoke to him, he got hold of your file and told you your options regarding overpayment.
He checked that lump sums are payable, or that you would have to make regular o/p's instead. He checked the limit regarding the amount you can pay. He reminded you taht the mortgage is on daily/monthly or annaul rest, and how that would affect your overpayments and their impact on the mortgage?

Or he just told you to get on with it?


ETA: Is the lump some a surprise, or did you mention it when you took out the new mortgage?

Edited by scotal on Monday 1st December 22:36

[scotal]

Dupont666 said:

how does one find out if they have a redemption fee?

Its on the Key features illustration you were given when you first investigated the mortgage, its also in the mortgage offer document.

[Dupont666]

scotal said:

Dupont666 said:

how does one find out if they have a redemption fee?

Its on the Key features illustration you were given when you first investigated the mortgage, its also in the mortgage offer document.

thats what i thought, but i see nothing in the offer document that states, you get charged £x for changing mortgages and moving away from us....

any ideas?

[dickymint]

Dupont666 said:

scotal said:

Dupont666 said:

how does one find out if they have a redemption fee?

Its on the Key features illustration you were given when you first investigated the mortgage, its also in the mortgage offer document.

thats what i thought, but i see nothing in the offer document that states, you get charged £x for changing mortgages and moving away from us....

any ideas?

Phone call?

[scotal]

Dupont666 said:

scotal said:

Dupont666 said:

how does one find out if they have a redemption fee?

Its on the Key features illustration you were given when you first investigated the mortgage, its also in the mortgage offer document.

thats what i thought, but i see nothing in the offer document that states, you get charged £x for changing mortgages and moving away from us....

any ideas?

Look at section 10 "What hapens if you dont want this mortgage any more"
or Section 11 "What happends if you want to make overpayments"

[Dupont666]

ah, max charge on early repayment is £1800

incentive for choosing mortgage is £250 and a fee which is £225

so is that the case i just pay either £250 or £475 and im free to get a cheaper mortgage?

[scotal]

Dupont666 said:

ah, max charge on early repayment is £1800

incentive for choosing mortgage is £250 and a fee which is £225

so is that the case i just pay either £250 or £475 and im free to get a cheaper mortgage?

No, you'll pay £1800 +£225, assuming your current deal is still in its incentive period, and if they have a clawback on the incentive they'll ask for that back as well.

[Dupont666]

scotal said:

Dupont666 said:

ah, max charge on early repayment is £1800

incentive for choosing mortgage is £250 and a fee which is £225

so is that the case i just pay either £250 or £475 and im free to get a cheaper mortgage?

No, you'll pay £1800 +£225, assuming your current deal is still in its incentive period, and if they have a clawback on the incentive they'll ask for that back as well.

so they class a switch of mortgage as a early repayment and i need to pay the early repayment fee first?

[King Herald]

dickymint said:

Dupont666 said:

scotal said:

Dupont666 said:

how does one find out if they have a redemption fee?

Its on the Key features illustration you were given when you first investigated the mortgage, its also in the mortgage offer document.

thats what i thought, but i see nothing in the offer document that states, you get charged £x for changing mortgages and moving away from us....

any ideas?

Phone call?

I called C&G, twice, spoke to two separate people (because they are part of TSB, and I know TSB are useless) and they both told me I can pay up to twice our regular monthly payments, and a 10% lump sum every year, with incurring redemption fees.

Ours is a fixed rate mortgage at 4.9% though, for 7 years, not a tracker. I currently pay £200 extra a month, but any extra cash I get in future will go in the building society for the moment, just in case......

[scotal]

Dupont666 said:

scotal said:

Dupont666 said:

ah, max charge on early repayment is £1800

incentive for choosing mortgage is £250 and a fee which is £225

so is that the case i just pay either £250 or £475 and im free to get a cheaper mortgage?

No, you'll pay £1800 +£225, assuming your current deal is still in its incentive period, and if they have a clawback on the incentive they'll ask for that back as well.

so they class a switch of mortgage as a early repayment and i need to pay the early repayment fee first?

oh yeah, especially at the moment. They might let you off the £225. So the sum you have to do is whether you can mortgage to a rate thats low enough to save you the redemption penalty.
They might also let you add the penalty to the mortgage.
If you are looking at a lumpsum payment, and not clearing the whole loan, they should let you do that, but they might charge you a proportional fee to pay off that part of the mortgage.

[Dupont666]

scotal said:

Dupont666 said:

scotal said:

Dupont666 said:

ah, max charge on early repayment is £1800

incentive for choosing mortgage is £250 and a fee which is £225

so is that the case i just pay either £250 or £475 and im free to get a cheaper mortgage?

No, you'll pay £1800 +£225, assuming your current deal is still in its incentive period, and if they have a clawback on the incentive they'll ask for that back as well.

so they class a switch of mortgage as a early repayment and i need to pay the early repayment fee first?

oh yeah, especially at the moment. They might let you off the £225. So the sum you have to do is whether you can mortgage to a rate thats low enough to save you the redemption penalty.
They might also let you add the penalty to the mortgage.
If you are looking at a lumpsum payment, and not clearing the whole loan, they should let you do that, but they might charge you a proportional fee to pay off that part of the mortgage.

thinking about switching mortgages so that i can find a cheaper one in todays climate, heard stories of mates that have nearly halved their mortgages cause they are on trackers at the moment and i want some of the action.

[scotal]

Dupont666 said:

thinking about switching mortgages so that i can find a cheaper one in todays climate, heard stories of mates that have nearly halved their mortgages cause they are on trackers at the moment and i want some of the action.

what rate are you on?

Your mates with trackers will have margins of +0.5 and +0.99, possibly even lower. So they've got the benefit of the full drop (2% in the last two months, more to come this week maybe) You won't get that at the moment, unless you have a mortgage of less than 60% LTV and provable earnings.

[Dupont666]

scotal said:

Dupont666 said:

thinking about switching mortgages so that i can find a cheaper one in todays climate, heard stories of mates that have nearly halved their mortgages cause they are on trackers at the moment and i want some of the action.

what rate are you on?

Your mates with trackers will have margins of +0.5 and +0.99, possibly even lower. So they've got the benefit of the full drop (2% in the last two months, more to come this week maybe) You won't get that at the moment, unless you have a mortgage of less than 60% LTV and provable earnings.

mine is 5.3% or something like that and stuck at that for another 9 months, was looking to shift to a cheaper one, paid off 10% and got enough money to pay off another 20%.... no income at the moment, but should have in the new year.

Am i screwed?

[pies]

4.1% is still a very good rate imho,and as rates are forecast to down even further i doubt you will save enough to cancel out the penalty

aimho

[trooperiziz]

tali1 said:

On a very new 3 yr tracker at 4.1%- been told with low rates it is best time to overpay- but had a word with my (trusted) broker and he was rather moot about it "if you can afford to overpay then do so regardless of rates"
So is overpayment wholly dependent (ie best when rates are very low?
And which will be strictly financially worthwhile quids in , lump sum or monthly?
(Any overpayment will be a lump sum to reduce amount rather than term btw)
Thanks

Do you have any money in the bank to tide you over for a few months if you get made redundant? If not, do that first.
Do you have any outstanding loans at a massively higher interest rate than your mortgage? If so, pay off those second.
Do you have enough money left after that to live a comfortable but not extravagant life? If yes, overpay your mortgage.

[scotal]

Dupont666 said:

mine is 5.3% or something like that and stuck at that for another 9 months, was looking to shift to a cheaper one, paid off 10% and got enough money to pay off another 20%.... no income at the moment, but should have in the new year.

Am i screwed?

The income thing is really going to rather spoil things. So personally I'd forget about remortgaging until the new job is secured and started. Whehter you make another 10% o/p prior to remortgaging is up to you, keeping it liquid in the event of no work may not be a bad idea. You'll have to judge that for yourself though..

[tali1]

tali1 said:

trooperiziz said:

tali1 said:

On a very new 3 yr tracker at 4.1%- been told with low rates it is best time to overpay- but had a word with my (trusted) broker and he was rather moot about it "if you can afford to overpay then do so regardless of rates"
So is overpayment wholly dependent (ie best when rates are very low?
And which will be strictly financially worthwhile quids in , lump sum or monthly?
(Any overpayment will be a lump sum to reduce amount rather than term btw)
Thanks

Do you have any money in the bank to tide you over for a few months if you get made redundant? If not, do that first.
Do you have any outstanding loans at a massively higher interest rate than your mortgage? If so, pay off those second.
Do you have enough money left after that to live a comfortable but not extravagant life? If yes, overpay your mortgage.

Overpayment allowed is 10%(@10k)- i can easily put in 3k no probs- No other debts.Job is as secure as can be.
I run a very tight financial ship (70% saver/30% spender.)Just want to maximize timing to reap full rewards of overpayment.

scotal said:

tali1 said:

On a very new 3 yr tracker at 4.1%- been told with low rates it is best time to overpay- but had a word with my (trusted) broker and he was rather moot about it "if you can afford to overpay then do so regardless of rates"
So is overpayment wholly dependent (ie best when rates are very low?
And which will be strictly financially worthwhile quids in , lump sum or monthly?
(Any overpayment will be a lump sum to reduce amount rather than term btw)
Thanks

This is the broker that set up the mortgage right?
So when you spoke to him, he got hold of your file and told you your options regarding overpayment.
He checked that lump sums are payable, or that you would have to make regular o/p's instead. He checked the limit regarding the amount you can pay. He reminded you taht the mortgage is on daily/monthly or annaul rest, and how that would affect your overpayments and their impact on the mortgage?

Or he just told you to get on with it?


ETA: Is the lump some a surprise, or did you mention it when you took out the new mortgage?

Edited by scotal on Monday 1st December 22:36

Lump is not surprise -as the facilty exsisted when i remortgaged(does it make any difference?).Broker did explain - but left it to me to decide.