An overpayment is any additional payment you make over your contractual monthly mortgage payment. These overpayments can either be a one-off lump sum or a regular overpayment made throughout the year.
Overpaying on your mortgage means you can save money on the total amount of interest you pay and potentially clear your mortgage balance quicker.
Before making an overpayment
You may be charged an Early Repayment Charge if you pay over your overpayment allowance. Find out what your overpayment allowance could be using the table below.
|Product Type||Overpayment Allowance|
|The Mortgage Works, Derbyshire Home Loans and E-Mex Home Funding mortgage products (e.g. fixed or Lifetime Variable)||Typically up to 10%* per year.
Please check your mortgage offer or most recent annual mortgage statement to find out how much you can overpay as a regular or lump sum payment.
*Some of our products will have a different maximum overpayment allowance.
|The Mortgage Works, Derbyshire Home Loans and E-Mex Home Funding mortgage products with a Managed Rate or Variable Rate mortgages||Unlimited|
How will overpayments affect my mortgage?
We calculate the interest on your mortgage daily, so all overpayments will reduce the amount of interest charged from the following day. We update your mortgage balance monthly, so any change to your contractual monthly payment will take place from the following month; unless you’re tied into a fixed rate mortgage product.
For example, in the following scenario:
- If you make a lump sum overpayment of £5,000 on 19 June, the overpayment is credited to the account
- From 20 June the mortgage balance is reduced immediately, the interest due is reduced at the end of the month
- On 1 July the interest due for the month of July is calculated, based on the reduced mortgage balance
- Your monthly payments due are also usually re-calculated.
How we apply overpayments to your mortgage
Unless you tell us otherwise, we’ll apply your overpayment to your mortgage using the following principles in this order; providing you’re within your overpayment allowance(s):
1. Interest only mortgages
2. Highest interest rate (where there is more than one account on the mortgage)
3. Highest balance (where there is more than one account on the mortgage).
Please contact us, if you’d like your overpayment to be applied in a different way to the above.
How to make overpayments
We can only accept payments from bank accounts that match the name(s) on the mortgage. Any third-party payments received will be returned.
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