Mortgage overpayments - daft question...

[ProbablyUnderACushion]

... but I can't find a clear answer elsewhere! Obviously I'll be checking it all with the provider at the time, but just wanted info for my preliminary enquiries before getting their sales pitch .

We're currently on a fixed deal that runs out in September, and are looking to fix again. Current deal lets us overpay whenever we like, as long as it's not more than £500 in a single month. (Suits us fine, as that's usually more than we can manage anyway!) Because we want to keep overpaying, that's quite high on our priority list for fixing again - would probably fix at a slightly higher rate to make it possible.

Looking at the fixed/standard rates offered by our current provider, they seem to have stopped the arrangement where you can overpay up to a fixed amount. Instead, they start applying Early Repayment Charges if you overpay "more than 10% of original balance". But I can't find any clear explanation of what period of time that covers - e.g. whether it's monthly, annually, within the fixed-term period, or what. A couple of places seem to suggest it's over the fixed-term period.

For example, we're looking at a 3-year fix. If our mortgage is £40K, then 10% of that is £4K maximum overpayment. Over the 3-year fix period, that would be £111 maximum overpayment per month, which is less than we'd like, and hugely less than we're allowed to overpay on our current deal. But that's the highest percentage I can see on any mortgage offered by our current provider. Have the rules changed - i.e. would we be better to choose a standard variable rate (obviously risking interest rises) that offers unlimited overpayments?

Any advice appreciated as my head is spinning with jargon and percentages

Ours is up to 10% per year. Really depends how much money you have to spare. If interest rates rise you could put in an account and pay off a lump sum.

Thanks, LIZS - so it isn't necessarily 10% over the full fix term, if yours is an annual limit. 10% over a year would be more like the kind of amount we could afford to overpay, so that would make a big difference to what we chose.

Obviously we'll check with the provider before we arrange it. They have a 3-year fix with maximum 10% overpayment, or a standard variable rate with unlimited overpayment, so I'll have to do a few more sums anyway, to see how we'd cope with a rate rise.

We are with nationwide.

It's 10% per year, so for 40K debt it'd be £4K first year etc etc

Thanks, BumWad (namechanging OP here ). We're also with Nationwide, so it's pretty likely that's what the 10% means on the info I found. If it's per year that would suit us pretty well - it's lower than the £500 per month we can currently overpay, but it's very rare that we could overpay by as much as that anyway.

(We're trying to overpay as much as possible over the next 3 years, then fix again so our monthly payments are regular and as low as possible, by the time our oldest goes off to university, as we'll be needing to stump up a fair bit for that!)

I think you are confusing 2 things. The relevance of the fixed period is that's how long the annual limit is in place for. After the fixed period you can overpay any amount without penalty (except the full balance)

So for the fixed period you can pay 10% off each year.

Ahh - thank you. Er, does that mean it might be worth letting our existing deal expire, then making unlimited overpayments for a while (e.g. the 3 years between now and uni time), before trying to fix again? Presumably we'd get a better fixed rate by fixing now rather than when rates rise, but our mortgage would be pretty small by then anyway...

Hi op. We have a deal where we can overpay up to 10% per year too, but we also have an offset saving account linked to our mortgage (which is fixed btw). If we could overpay by more than 10% we put the extra in here and it effectively reduces the mortgage by that amount with no penalties. Could this work for you? It's with Scottish Widows.

That also might be worth looking into, as it would avoid tying up the money in case we needed it :)

(sorry, lost the second part of my reply!) - meaning we could save money and have the choice either to use it for overpayments if we ever had no limit in the future, or use it for other things.

very few new mortgages are fully flexible now - you really need to read your paperwork
the capital limit may have nothing to do with the rate fix

We had an open plan mortgage and I loved it. We weren't able to port it fully when we moved though which was a shame.