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the overpayment, do so; this will have the effect of raising the monthly payment, but even when all the overpayment is withdrawn this should not be beyond the current monthly payment - so my actual monthly outgoings remain constant (assuming the base rate stays the same).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?