What other questions should I ask my mortgage provider?
I am in the UK. In January 2007 I took out a 25 year repayment mortgage, which permits overpayments (which may be set up to either reduce the term or reduce the monthly payment) and also permits me to subsequently request to withdraw those overpayments.
Since January 2007 I have made a significant amount of overpayments and set them up to reduce the term. This has brought the end date in from Jan 2032 to Nov 2024. The monthly payment remains the same as it always has been (it is a base rate tracker with a collar and the base rate has never been above the collar in the entire time I have had the mortgage).
I now have some expenses coming up and want to withdraw the overpayments I have made (probably all of them in the next two years or so, but not all at once). I contacted my mortgage provider to ask how I would go about requesting the withdrawal and they said “just ring this number and ask, and by the way please note that this withdrawal will increase your monthly payments”. This is not what I wanted (I wanted to push the term back out again) so I asked if I could do that instead, and they said no, but I could make a separate application to extend the term on my mortgage at any time, without needing additional affordability checks as long as it does not go beyond my retirement date.
So with this all in mind, here is my plan:
- Extend the term (probably back to original term, which is well within my retirement date, but TBD)
- This will reduce the required monthly payments
- Continue to make the same actual monthly payments as now
- Make sure all future overpayments are set to “reduce monthly payments” not “reduce term” as they have been
- This will effectively mean I am overpaying every month; each month my required monthly payment will go down and my overpayment portion will go up to compensate
- When I need to withdraw the overpayment, do so; this will have the effect
of raising the monthly payment, but even when all the overpayment is withdrawn this should not be beyond the current monthly payment – so my actual monthly outgoings remain constant (assuming the base rate stays the same).
Before proceeding with this plan I want to ask my mortgage provider the following questions:
- When I extend the term, does this still allow access to withdrawal of my existing overpayment balance?
- When I extend the term, are there further restrictions / penalties on making overpayments? (At the start of the mortgage there was a 3 year period when I could only overpay by £500 / month, otherwise there was a 5% penalty)
My questions for you all are:
- Does my plan make sense?
- Are there any other questions I should ask my mortgage provider before going ahead with the term extension?
For the info of anyone else who may be doing this, or considering it….
First of all I rang the mortgage helpline. After eventually finding a way to speak to a human I asked if extending the term would bring new terms and conditions – they said no, not unless you choose a new product. If you simply extend the date it’s no change. I explicitly asked my two questions above and they again said no, not unless you are choosing a new product.
So I went ahead and applied online to extend the mortgage term. I had to fill in a bunch of “eligibilty” questions – basic things like are you bankrupt, will you be retired by the proposed end date of the mortgage etc. Then it said they will consider my application (which might include a credit check) and get back to me within 5 days.
I will update here when they have got back to me.
Update: 13 days later I received a letter from them giving me the new (later) end date and the new (lower) monthly payment, so at no point have I had to sign anything. The letter doesn’t explicitly mention the overpayment reserve. It does claim that the new details should now be in place on the online bank, but they are not; I’ll wait until after the end of the calendar month and see if it all shows up correctly then. As far as I can tell they did NOT carry out a credit check. I coincidentally had a “your details have been hacked” letter from Equifax with a free offer to check my credit report, which also shows any accesses, and does not list a search by my mortgage provider.