How to make additional payments and take years off your mortgage.
How does it work?
You can significantly reduce the total amount of interest you pay on your mortgage and potentially knock years off your loan by making overpayments. This is done by paying a bit extra in your usual monthly payment, or by making occasional lump sum payments on top of your monthly payment.
Whether or not these options are available to you will depend on the mortgage deal you have selected.
By overpaying on your mortgage payments, any additional payments you make will immediately reduce your overall mortgage balance and therefore the amount of interest being charged will also reduce. This can help reduce future payments and may mean that you can pay off your mortgage loan sooner.
You may make overpayments either as a lump sum or as regular additional payments. Overpayments will be credited to your account on the same day, therefore reducing your account balance straight away. Because interest is charged daily, you will gain an immediate reduction in your interest charges. If overpayments are made by cheque, however, they will not reduce the balance until the cheque has cleared.
Making a lump sum payment
If you wish to make a lump sum payment to your mortgage, you need to consider whether you wish us to reduce your monthly payment immediately to reflect the lower amount of interest that you will then be charged. Alternatively, if you do not give us any instructions regarding your monthly payment it will continue at the previous level until the next Account Review when it will be recalculated based on the reduced balance and existing loan term. You will, of course, still have the benefit of reduced interest charges from the date the payment is made.
If we notify you of a reduction in your monthly payment and you wish to continue paying at a higher level, please call our Customer Contact Centre. It is possible to make lump sum payments to a particular part of your loan by giving us specific instructions to this effect at the time you make the payment. Otherwise, the overpayment will automatically be spread across all parts of your loan in proportion to the amount of your registered payments relating to each loan part.
Making a regular additional payment
If you wish to make a regular additional payment, and your payment is collected by Direct Debit, you will need to call our Customer Contact Centre to authorise the collection of an amount on top of your monthly payment.
Where a regular additional payment is registered, it is possible to make the overpayment to a particular part of your loan by giving us specific instructions to this effect when setting up the arrangement with us.
Making a static payment arrangement
A static payment arrangement is where the payment is set at a fixed amount and is continually collected until either you cancel the arrangement or this amount is no longer sufficient to cover the registered payment.
Where a static payment is registered, any overpayment will be spread across all parts of your loan in proportion to the amount of your registered payments relating to each loan part. It is not possible to make the overpayment to a particular part of your loan with a static payment.
Why it could work for you
You can start to reduce your mortgage balance, meaning you could potentially pay off your mortgage sooner.
As savings rates are currently low, the amount you would save on your mortgage interest can amount to more than you would otherwise earn in savings interest.
The amount you can overpay each year depends on the mortgage you are on. Please refer to your product factsheet and mortgage offer for full details of overpayment restrictions and Early Repayment Charges.