We remortgaged in August last year, onto a 2 year fixed deal. The contract that we signed specified what our monthly payment would be, and also said that we could overpay up to 10% of the balance each year without penalty (this year, that is just over £10,000 as we have just over 100k left on the mortgage).
We recently overpaid £7,000 which we got from an inheritance. We have not gone over the annual overpayment limit but the mortgage company has now written to us saying that it is reducing our monthly mortgage payments by £130 each month. When I said that I wanted to keep them at the same level as before, it refused and said that we would be liable to pay a penalty unless we reduce the payments. In the end it has agreed to leave the monthly payment as it is but it says that it will reduce the remaining amount that we are allowed to overpay this year instead. It says this is common practice because otherwise we'll end up paying less interest than it was expecting.
I don't understand this - does anyone know of any common contractual clause which would allow a mortgage company to do this, so that I can check for it in mine? I can't see anything obvious in there but don't want to make a fool of myself by complaining if this is accepted practice! As far as I am concerned, we signed up to pay 12 equal payments PLUS up to 10% of the balance, without penalty, so I can't see why they are not letting us stick to the monthly payments that were agreed. This is important to us because ideally we were hoping that the inheritance would make a big dent in the mortgage and help us get down to a much more competitive LTV percentage by the time we come to remortgage. If we're going to be restricted in what we can pay off then that is not going to happen :-(
We recently overpaid £7,000 which we got from an inheritance. We have not gone over the annual overpayment limit but the mortgage company has now written to us saying that it is reducing our monthly mortgage payments by £130 each month. When I said that I wanted to keep them at the same level as before, it refused and said that we would be liable to pay a penalty unless we reduce the payments. In the end it has agreed to leave the monthly payment as it is but it says that it will reduce the remaining amount that we are allowed to overpay this year instead. It says this is common practice because otherwise we'll end up paying less interest than it was expecting.
I don't understand this - does anyone know of any common contractual clause which would allow a mortgage company to do this, so that I can check for it in mine? I can't see anything obvious in there but don't want to make a fool of myself by complaining if this is accepted practice! As far as I am concerned, we signed up to pay 12 equal payments PLUS up to 10% of the balance, without penalty, so I can't see why they are not letting us stick to the monthly payments that were agreed. This is important to us because ideally we were hoping that the inheritance would make a big dent in the mortgage and help us get down to a much more competitive LTV percentage by the time we come to remortgage. If we're going to be restricted in what we can pay off then that is not going to happen :-(