Thinking about raising some cash via a mortgage on my house. However I want the flexibility to pay off a lump sum off the mortgage each month which in turn reduces the payment for the next month and so on:

For example:

Loan of £70,000 over 20 years at 4.74%

Month 1
-------
Balance £70,000
Monthly Interest: £276.50
Total: £70,276.50
Monthly Payment: £451.98
Balance: £69,824.52
Overpayment: £550
New Balance: £69,274.52

Month 2
-------
Balance: £69,274.52
Interest: £273.63
Total: £69,548.15
Monthly Payment: £448.41
Balance: £69,099.74
Overpayment: £650
New Balance: £68,449.74

Month 3
-------
Balance: £68,449.74
Interest: £270.38
Total: £68,720.12
Monthly Payment: £444.20
Balance: £68,275.92
Overpayment: £5000
New Balance: £63,275.92

and so on.

This way I can work out what I can afford to pay minimum each month and if I have a good month, I can knock off more from what I owe, which in turn reduces the next monthly payment. In the end I could pay back the whole lot in a matter of 4 or 5 years and hardly incur any interest charges!

It is important that I keep to a mimimum amount to pay each month as I don't want to have to pay more than I want to each month, as in the case if I took out a 5 year loan and ended up with high monthly payments.

I want the flexibility of paying what I want above the minimum payment. I've done the sums and this works out to be no more expensive than say borrowing the money over 5 years if I pay it back in the same time period. BUT I get the chance to pay what I want extra each month. Also only having a minimum payment to pay each month, I won't be affected as much in case of interest rises.

Can anyone recommend any building societies that do this?

Thanks.

 

Take a look at the 'Freestyle' mortgage from Standard Life Bank - you can set the term of the loan to be 25 years, making the minimum payments very small, but then arrange to make regular or occasional overpayments whenever you like without penalty.

At any time, you can also borrow back overpayments you've made, so there's no reason not to pay back any spare cash you have lying around - you can always borrow it again.

That's the deal they were doing about 3 1/2 yrs ago, anyway...

A.

 

Most banks have mortage products which do this, and also allow you to draw down the over-payments should you want to at a later date. They're called 'flexible' mortgages. Standard Life, BoS and Abbey were the first ones, but they've all followed suit now.

 

Woolwich have the Open Plan product thats been round for a while, I think its a good product but i question the customer services that i have received.

Dave

 

I believe Yorkshire building society does this too, as they tried to persuade me. However, I don't really have spare cash to do it, but otherwise it looks like a damn fine plan.

 

I'm always paying off bits of mortgages, but you do notice that they drag their heels as much as possible when processing it.
i.e if you pay off 5k on the first of the month, they might think about processing it on the first of the next month and will take effect the following month......... they're all at it


edited to say - I'm using Yorkshire discounted one (2.75%) for one and can pay back money from day 1 - which I virtually did

Get the best discounted with zero payback penalties (not the same as zero redemption) so your over payments will really take effect while the rate is discounted i.e. its coming straight off the capital not paying off loads of interest.


[Edited by workshy_fopp - 1/28/2003 3:16:23 PM]

 

pick up a copy of Your Mortgage from Smiths all current available mortgages are listed in there , monthly.

Make sure that whatever mortgage you get will apply any reductions instantly , some banks/b socs will only apply reductions annually regardless of when you actually give them the cash

 

Go for an offset mortgage then you always have access to the cash although it has the effect of reducing your interest on the mortgage

 

I have a flexible mortgage taken out in April 2001 for 143k. 1st payment was 956 per month, then the interest rate dropped and the recalculated at 873 per month, but we kept it at 956. We also 'fed it' 1K cheques every other month or so. We've got it down to 124k now which only needs 738 per month, but we've just upped the payment to £1k a month.

The only gamble you take is with interest rates, if they go up then so do your payments. Our mortgage lender would only lend on guaranteed earnings, and as we get a lot of overtime it made sense to pay extra on the mortgage as the interest saved is worth more than the interest earnt if it was in a savings account.

 

ditto to all the above

Try Intelligent Finance(Halifax)

Reasonable rate and overpayment and offset facilities.

They even advanced me £30k I didn't want.

http://www.if.com/

[Edited by russell hayward - 1/29/2003 3:27:56 PM]

 

Woolwich Open Plan. - never had a problem with customer services. You can pay up to 10% per year without penalty - as above, set it up as interest only so your payments will be minimal, then make overpayments as and when you feel like it. If you make an overpayment today, this will be subtracted from your balance as of midnight tonight. You get a nice monthly statement detailing how much you saved with each overpayment. Talk to a mortgage broker, as we get access to deals that the general public don't.

Best Woolwich deal I could get you at the minute would leave you paying interest at £215.25 (3.69%) for 2 years with no tie in after the two years.

 

I have a Woolwich open plan account and have had problems with Customer Services. I paid off a lump sum of <>£10k and they didn't take it off the capital, but set it up as overpayments so I could default on my monthlies if I wanted!!! 10k!!! Getting the mortgage in the first place was a paper nightmare but the terms were what I wanted.

My next mortgage will not be with them.

As far as I understand the calcs, the mortgage I have allows you to put in lump sums, but you will not get these credited to your acct (ie. save money on interest) until end of year. The way I do this is to save money in a standard savings acct and then send in a cheque for the lot. Saves on paperwork hassle too.

Joolz

 

The Standard Life Bank Freestyle mortgage allows to overpay, lump sum, and offset (the latter costs £150 to setup for existing mortgage holders).

By using my savings to offset the amount I still owe on the mortgage I am £10 better off per month than if my savings were in a normal savings account and even better I'm not paying any tax on the interest to Gordon Brown.