Mortgage question #532523

[Bailo]

I've made two overpayments to my mortgage recently and both times, the bank (Bank of Ireland) have reduced our monthly payment, not the term. I rang up after the first time and asked them to swap to term reduction and they said fine it's all sorted. After the 2nd overpayment, turns out it wasn't sorted and I need to complete a term reduction application each time.

 

Rang them this afternoon and went through a long process of applying for a term reduction, which I stopped at the point of being asking what I want to reduce the term to - that's not what I want to do, I want my overpayments to be credited to my outstanding balance, keep the monthly payment the same and bring the term down. Apparently I can't do that, it's either overpay and have a reduced monthly payment or apply for a term reduction. Is that standard or are they trying to pull a fast one so they keep making the same interest out of me? Everything I've read suggests that when opting to make overpayments within your limit you can reduce you monthly payment or your term but banks like to default to the former.

[Murphman]

I've made two overpayments to my mortgage recently and both times, the bank (Bank of Ireland) have reduced our monthly payment, not the term. I rang up after the first time and asked them to swap to term reduction and they said fine it's all sorted. After the 2nd overpayment, turns out it wasn't sorted and I need to complete a term reduction application each time.

 

Rang them this afternoon and went through a long process of applying for a term reduction, which I stopped at the point of being asking what I want to reduce the term to - that's not what I want to do, I want my overpayments to be credited to my outstanding balance, keep the monthly payment the same and bring the term down. Apparently I can't do that, it's either overpay and have a reduced monthly payment or apply for a term reduction. Is that standard or are they trying to pull a fast one so they keep making the same interest out of me? Everything I've read suggests that when opting to make overpayments within your limit you can reduce you monthly payment or your term but banks like to default to the former.

 

 

 

 

Bailo the reduction would be minimal, just overpay by as much as you feel you can afford. It's a poor system not a systematic attempt to get more money out of you.You bank online, manage it, it's easy. I agree it's not very good like but why not apply for a term reduction say, every time you switch deals? 

[Bailo]

Bailo the reduction would be minimal, just overpay by as much as you feel you can afford. It's a poor system not a systematic attempt to get more money out of you.You bank online, manage it, it's easy. I agree it's not very good like but why not apply for a term reduction say, every time you switch deals? 

We might, remortgaging in June.

 

I don't understand - if we can overpay £20k a year (that's about our fee-free limit) then the effect on our term will be massive. Don't I have the option to choose whether my monthly payment decreases (and continue on the same term) or if it goes towards capital repayment?

Edited February 8, 2018 by Bailo

[Murphman]

We might, remortgaging in June.

 

I don't understand - if we can overpay £20k a year (that's about our fee-free limit) then the effect on our term will be massive. Don't I have the option to choose whether my monthly payment decreases (and continue on the same term) or if it goes towards capital repayment?

 

Ok. Just pay the original contractual payment by paying the difference between the amount on the original illustration and the reduced amount they now want to take. Do it ad hoc or set up a standing order, same impact. If you have £20k to pay off each year you should probably consider dramatically shortening your mortgage term, June sounds perfect.

Edited February 8, 2018 by Murphman

[Bailo]

Yeah, it's only a tenner difference at the moment and we can only overpay in 500quid blocks but I'll just add it on.

 

Wanted to get to under 70% LTV for remortgaging really. At about 73% now.

[Murphman]

Yeah, it's only a tenner difference at the moment and we can only overpay in 500quid blocks but I'll just add it on.

 

Wanted to get to under 70% LTV for remortgaging really. At about 73% now.

 

I wouldn't kill yourself to get there, it won't give you THAT much more choice.

[Bailo]

I wouldn't kill yourself to get there, it won't give you THAT much more choice.

OK, cheers. About £8k off that, would feel good to get there as we've kept a 25yr term across 3 houses now.

[Jay M]

I recently did this.

 

For example, our minimum repayment was £650, but we could afford to overpay. We rang up the Building Society our mortgage is with and said we'd like to up our monthly payment to £1000. They made the update to change our expected payment to £1000 and that is the amount that has been taken since.

 

Maybe it's a terminology thing with the bank.

[Hassony]

looking into remortgaging my house currently, would the forum experts advice to go for 2 or 5 years fixed rates? 

[Leo No.8]

The bad news for you Hass is that Murph is the forum expert in this instance. Best of luck.

[Cam]

looking into remortgaging my house currently, would the forum experts advice to go for 2 or 5 years fixed rates?

Yes.

[Cobs]

looking into remortgaging my house currently, would the forum experts advice to go for 2 or 5 years fixed rates?

Depends on your circumstances

[Hassony]

Depends on your circumstances

Any concern that interest rates might rise over the next 2 years? With brexit and all?

[Molby]

why not just use the extra cash flow to buy either high risk investments (penny shares, crypto etc)

 

or risk-free investments (premium bonds)?

 

if you do that, the money is out of your account so you can't waste it but in the case of PBs, you might win prizes

I win prizes now and again, although sadly never more than £50 so far

[Redwire]

Any concern that interest rates might rise over the next 2 years? With brexit and all?

More likely to go negative

[Murphman]

looking into remortgaging my house currently, would the forum experts advice to go for 2 or 5 years fixed rates? 

 

Yes.

[Hassony]

More likely to go negative

To control inflation?

[Cobs]

Any concern that interest rates might rise over the next 2 years? With brexit and all?

 

no-one knows what's going to happen with Brexit 

 

if you're happy where you are, can't forsee any reason why you might move over a certain time period and can afford the repayments then fix for that period of time and forget about it.

why not just use the extra cash flow to buy either high risk investments (penny shares, crypto etc)

 

or risk-free investments (premium bonds)?

 

 

or do any of a myriad of tax-efficient things in between these two extremes

[Hassony]

Cool, thanks Cobs

[Molby]

no-one knows what's going to happen with Brexit 

 

if you're happy where you are, can't forsee any reason why you might move over a certain time period and can afford the repayments then fix for that period of time and forget about it.

 

or do any of a myriad of tax-efficient things in between these two extremes

or something entrepreneurial that generates vast profits and provides taxation revenue

 

eg naked food truck

[Cobs]

or something entrepreneurial that generates vast profits and provides taxation revenue

 

eg naked food truck

 

deffo more interesting than premium bonds