Mortgage overpayment Q&A following rare net repayment of mortgage debt in July
Figures from the Bank of England show homeowners repaid £1.4bn more mortgage debt in July than they borrowed.
With so many more borrowers making additional repayments, it is advisable to check whether your mortgage is sufficiently flexible if you plan to make overpayments particularly if you are about to purchase a property or remortgage.
Why are people making more overpayments?
With fewer people taking expensive overseas holidays, commuting, or going out as much, they are taking advantage of the opportunity to bring down their outstanding balance.
How much can you overpay each year?
Most lenders cap the amount you can overpay at 10% per annum apart from Metro Bank and Digital Mortgages as they allow 20%. Another lender allows up to 50% overpayments to be made on its mortgages per year without charge.
Flexible tracker rate deals are also available so borrowers can make unlimited overpayments, and Trinity Financial’s brokers have access to some incredibly cheap deals.
Some private banks will build lump sum overpayments into the mortgage offer, so chunks are automatically repaid when paid quarterly or annual bonuses.
Why would you want to make overpayments when it is not a requirement?
Many borrowers want to repay their mortgage as quickly as possible, so they make lump sum overpayments. There has also been an increase in interest-only mortgages taken, so borrowers need to have plans to repay the debt.
What happens when you get the end of your interest-only mortgage?
We regularly speak to older people reaching the end of their terms, and they still owe their lender money. These borrowers either downsize, opt for lifetime mortgages or try to refinance to another lender. It is harder to remortgage when you are in your seventies, especially if you do not have a sufficient pension or investment income. Many of them regret not making more overpayments.
How many lenders offer no early repayment charge mortgages are there?
There has been a rise in lenders offering more flexible mortgages allowing overpayments with decent rates. Some of the biggest lenders include TSB, Barclays, HSBC, Skipton and Santander, Coventry for Intermediaries and Leeds Building Society.
How many lenders offer no early repayment charge mortgages are there?
There has been a rise in lenders offering more flexible mortgages allowing overpayments with decent rates. The biggest lenders include TSB, Barclays, HSBC, Skipton and Santander, Coventry and Leeds Building Society.
Many of our clients are borrowing more rather than making overpayments
Many borrowers have been investing their money rather than paying off their mortgage to get better returns. They are purchasing buy-to-lets, putting money in stocks and shares ISAs and finding other investment opportunities.
Call Trinity Financial on 020 7016 0790 to secure a mortgage or book a consultation
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