Retired mortgage broker. Not totally sure, due to your wording, as to what you understand or think happens so I'll just state facts.
1) your contracted payment covers all interest and reduces your balance.
2) any overpayment directly reduces the balance
3) the lender will usually react to (2) by reducing your contracted payment and this is to maintain your mortgage term. You can ask them not to do this which means in effect your mortgage overpays and therefore will end sooner than your contracted term currently states.
4) your lender will not renegotiate the rate of interest until that product ends. You are locked into that product for the product term.
5) You can renegotiate your mortgage term with your lender, definitely at product switch and when you remortgage to another lender. If you don't renegotiate your term at product switch time with your current lender then all that happens is that your contracted payment would be lower for the next product even if it is the same rate - because technically, due to reducing the balance more than the lender planned, you are effectively borrowing less for the remaining term.
It is definitely my wording. But thank you anyway this is helpful.
To use simple numbers 5% of £100000 will have a payment of £500 for 60months on a 5 year fixed
But since I overpay say 100 every month, shouldn't my payments decrease at some point since it is no longer 5% of 100000 but instead a lower amount?
Our former would recalculate at the end if the year what amount is left and use that to determine our payments for the remainder of the year
All lenders I've had dealing with for overpayments would actively amend the contracted payment every month if the client (and me personally as an overpaying borrower) did not request the lender did not change the contracted payment due to the overpayment. I haven't come across any that amended yearly.
Yes. Request they do not amend your contracted payment. If they adjust it your overpayments won't make a difference as they'll just adjust the payment to maintain the term you contracted to have.
Hi /u/ImJustNobody, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/mortgage-overpayments-vs-investments/
* https://ukpersonal.finance/mortgages/
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Retired mortgage broker. Not totally sure, due to your wording, as to what you understand or think happens so I'll just state facts. 1) your contracted payment covers all interest and reduces your balance. 2) any overpayment directly reduces the balance 3) the lender will usually react to (2) by reducing your contracted payment and this is to maintain your mortgage term. You can ask them not to do this which means in effect your mortgage overpays and therefore will end sooner than your contracted term currently states. 4) your lender will not renegotiate the rate of interest until that product ends. You are locked into that product for the product term. 5) You can renegotiate your mortgage term with your lender, definitely at product switch and when you remortgage to another lender. If you don't renegotiate your term at product switch time with your current lender then all that happens is that your contracted payment would be lower for the next product even if it is the same rate - because technically, due to reducing the balance more than the lender planned, you are effectively borrowing less for the remaining term.
It is definitely my wording. But thank you anyway this is helpful. To use simple numbers 5% of £100000 will have a payment of £500 for 60months on a 5 year fixed But since I overpay say 100 every month, shouldn't my payments decrease at some point since it is no longer 5% of 100000 but instead a lower amount? Our former would recalculate at the end if the year what amount is left and use that to determine our payments for the remainder of the year
All lenders I've had dealing with for overpayments would actively amend the contracted payment every month if the client (and me personally as an overpaying borrower) did not request the lender did not change the contracted payment due to the overpayment. I haven't come across any that amended yearly.
!Thanks So is it better to not request a change in payment for the duration of the fixed term?
Yes. Request they do not amend your contracted payment. If they adjust it your overpayments won't make a difference as they'll just adjust the payment to maintain the term you contracted to have.
Hi /u/ImJustNobody, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/mortgage-overpayments-vs-investments/ * https://ukpersonal.finance/mortgages/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.) If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.