Paying a lump sum off the mortgage

[Kitkatchunkyplease]

Please do speak to me like I am very stupid, because I don't understand this process at all and the mortgage provider's website is deeply unhelpful.

I know all deals are different but I don't understand how to go about this!

We are coming to the end of a fixed 5 year deal on a 27 year mortgage. I would like to be able to pay off a significant sum but I don't understand how you do this without incurring early repayment charges, and everything online is like a riddle !
Do I need to go onto a variable rate and then pay off a lump sum? After that can I get another fixed rate deal? Really frustratingly I can't see anyone actually in branch for help.
Thanks so much in advance for anyone who takes the time to help

Generally you can overpay 10% a year without incurring a break fee so I’d encourage you to do that straight away. For the balance, from my understanding, yes you’d wait until the fixed rate ends, pay the lump and then fix again after that.

No, so when you start the application for your new mortgage you give the figure owing minus your payment. Its actually quite simple but can be overwhelming for some to understand.

OP in your shoes I'd:

• deduct the lump sum you want to repay from the remaining amount owed
• then call a number of companies and see who will give you a good new fixed rate deal for that amount
• once you've chosen a new co, they will help you transfer your mortgage and you just pay the lump sum then.

Caveat: not a mortgage expert but that's what I did.

Not an expert on this but I did it a few times.

Each fixed term deal is different and your paperwork would tell you how much you can pay off while the deal is running. If it is 0 then just wait till the end of the fixed term deal and you will automatically be dropped onto the standard variable rate. Usually at this point you have more flexibility to pay lump sums off but you would still need to check if there are limits. After that you can choose if you want to sign up for another fixed term deal.

As Beelady says. In our case, once the fixed term ended the overpayment charge didn’t apply, so we paid in a lump sum with no penalty and then immediately moved to a new fixed term deal (as it happens with the same provider but the same would have worked if we were moving).

Always best to check with your current provider to make sure, we did so via the web chat so we got a very clear answer.

Your early repayment charges are on the five year deal. Not on the 27 year mortgage.

So once you are off your five year deal you can pay then. Ask them what date is the earliest date you can pay a large lump sum to it. And pay it that day.

In the meantime look around for deals on the smaller mortgage amount you will have.

Don’t look at the APR rate of the mortgage when making comparisons as that includes the remainder of the mortgage AFTER the deal ends at their standard variable rate, which you won’t care about as you will grab another deal. Look at the interest rate only to do comparisons.

Presumably if you stay with the same bank you will arrange to go into a new deal directly from your old deal, just for the smaller amount, so you won’t go onto the standard variable rate.

I think that’s how it all works though it’s been a while!

@BeeLady15

Generally you can overpay 10% a year without incurring a break fee so I’d encourage you to do that straight away. For the balance, from my understanding, yes you’d wait until the fixed rate ends, pay the lump and then fix again after that.

10% of what, though?

10% of the debt

Oh well this actually sounds very straight forward Thanks so much for explaining it. I didn't know if I could get another mortgage deal AND also pay off a lump. So thanks !

We’re just about to do this Op as our two year fixed ends on 31/3. This is with HSBC. We’ve already over paid our 10% allowance for this year, but HSBC said that on the final day of our term (31st March) we can overpay as much as we like of the mortgage without incurring an ERC. Our new fixed deal (also with them) will then kick in the following day (1 April).

It’s worth a quick phone to your lender to ask if you can do the same. If you’re renewing with the same lender this should’ve very straight forward to do.