Mortgage Overpayment

tommypepper

So ive only recently become aware that you are limited to 10% overpayment while on fixed rate.

My bank neglected to inform me of this and I have been overpaying my mortgage by more than 10% for over a year. They have been taking it as DD and as far as I can see my prinicipal is being reduced by my overpayment.

Am i missing something?

I cant understand why you should be limited. A fixed rate agreement for say 3 years shouldnt prevent you from reducing the principal separately. Obviously Im obliged to pay a set amount as per agreement but only for three years no?

ldy4mxonucwsq6

tommypepper wrote: »

So ive only recently become aware that you are limited to 10% overpayment while on fixed rate.

My bank neglected to inform me of this and I have been overpaying my mortgage by more than 10% for over a year. They have been taking it as DD and as far as I can see my prinicipal is being reduced by my overpayment.

Am i missing something?

I cant understand why you should be limited. A fixed rate agreement for say 3 years shouldnt prevent you from reducing the principal separately. Obviously Im obliged to pay a set amount as per agreement but only for three years no?

How long is left on your 3year fixed term period?

As far as I know you can only pay a max of 10% of your monthly repayment as a regular overpayment for fixed rate mortgages - this is what I have set up at the moment (afaik there's no limit on variable rate mortgage overpayments).

What percentage of your monthly payment are you overpaying by at the moment? Are you overpaying separately or does the one amount come out by DD for your mortgage?

Bob24

tommypepper wrote: »

I cant understand why you should be limited.

Basically in exchange for guaranteeing you a certain interest rate the bank is asking you to guarantee they’ll make a minimum profit (if you repay too much too early they’re loosing out on the interest they would have charged you).

tommypepper

Bob24 wrote: »

Basically in exchange for guaranteeing you a certain interest rate the bank is asking you to guarantee they’ll make a minimum profit (if you repay too much too early they’re loosing out on the interest they would have charged you).

Yes obviously and I will continue to pay as the agreement. But it's not a guarantee for the life of the mortgage.

tommypepper

Astrid Inexpensive Pacemaker wrote: »

How long is left on your 3year fixed term period?

As far as I know you can only pay a max of 10% of your monthly repayment as a regular overpayment for fixed rate mortgages - this is what I have set up at the moment (afaik there's no limit on variable rate mortgage overpayments).

What percentage of your monthly payment are you overpaying by at the moment? Are you overpaying separately or does the one amount come out by DD for your mortgage?

One DD, 25% overpayment. 2 years left on fixed term

Teyla Emmagan

tommypepper wrote:

My bank neglected to inform me of this and I have been overpaying my mortgage by more than 10% for over a year. They have been taking it as DD and as far as I can see my principal is being reduced by my overpayment.

So what is wrong? I don't understand.

Who says this 10% limit applies to you anyway?

tommypepper

Teyla Emmagan wrote: »

So what is wrong? I don't understand.

Who says this 10% limit applies to you anyway?

It applies to everyone according to the bank. Well what's wrong is I'm overpaying when the website clearly says its not allowed. So do u think I should just ignore it and assume I'm 'putting one over' the bank?. That never works out well. I'm wondering if anyone on here has experienced something similar so that when I ring the bank Monday I am as well informed as possible.

ldy4mxonucwsq6

tommypepper wrote: »

One DD, 25% overpayment. 2 years left on fixed term

I would double check it with your bank. Just in case there are charges applied for overpaying the fixed mortgage by too much. Might just be an oversight that this has been allowed and best to catch it early in that case.

You can still put the extra 15% offside yourself and then pay it off as a lump sum once the fixed term comes to an end anyway.

Bob24

tommypepper wrote: »

Bob24 wrote: »

Basically in exchange for guaranteeing you a certain interest rate the bank is asking you to guarantee they’ll make a minimum profit (if you repay too much too early they’re loosing out on the interest they would have charged you).

Yes obviously and I will continue to pay as the agreement. But it's not a guarantee for the life of the mortgage.

Yes once yo revert back to variable rate then that restriction won’t apply anymore and you’ll be able to repay as much as you want. The give and take aspect is that *as long as the banks guarantees the rate* you guarantee you won't overpay too much in order to maintain their profits, but once that deal stops that no party is is bound to their commitment anymore.

tommypepper

Astrid Inexpensive Pacemaker wrote: »

I would double check it with your bank. Just in case there are charges applied for overpaying the fixed mortgage by too much. Might just be an oversight that this has been allowed and best to catch it early in that case.

You can still put the extra 15% offside yourself and then pay it off as a lump sum once the fixed term comes to an end anyway.

Well looking back at my records it seems I was concerned about this over three years ago. (I fixed for two years back then). I rang the bank and asked them to confirm my rate, monthly repayment at that rate and that I was going to overpay by x amount. They sent out a letter confirming this and no mention of the overpay cap of 10%.

Teyla Emmagan

tommypepper wrote:

Well looking back at my records it seems I was concerned about this over three years ago. (I fixed for two years back then). I rang the bank and asked them to confirm my rate, monthly repayment at that rate and that I was going to overpay by x amount. They sent out a letter confirming this and no mention of the overpay cap of 10%.

Then I'd say you're alright. It may be a breach of your T&Cs but they won't necessarily apply any penalty. Especially if you have that letter. However ring them to be sure.

tommypepper

Following up here as FYI.

Received a letter back from BOI. As I was overpaying before fixing I am not liable for penalties.