When you take out a mortgage, it will usually come with some conditions on how you can repay it. In addition to your monthly payments you may be allowed to make overpayments on your mortgage up to a certain threshold or redeem the loan early.
Making overpayments may reduce both the monthly payment and the interest payable on the overall amount. Overpayments that exceed the fee-free threshold set out by your provider will be subject to an Early Repayment Charge (ERC), which is usually calculated as a percentage of the amount overpaid.
For early redemption, which is where the loan is repaid in full, this is the typically calculated on the total original loan amount.
Mortgage amount: £200,000
Overpayments: Fee-free up to 50% of the original loan
ERC for overpayments: 3% of the overpayment
Early Redemption Charge: 3% of the original loan amount
Overpayment of £100,000
Using the assumptions above, if you were to make an overpayment of £100,000 on the mortgage then no ERC would be payable as this falls within the 50% fee-free allowance.
Overpayment of £150,000
Using the assumptions above, if you were to make an overpayment of £150,000 on the mortgage an ERC would be charged on the portion above the 50% fee-free allowance, giving an ERC of £1,500.
Overpayment of £200,000
Using the assumptions above, if you were to make an overpayment of £200,000 therefore fully redeeming the mortgage then the Early Redemption Charge payable would be £6,000, which is calculated as 3% of the original loan amount.
At Ipswich Building Society we’re pleased to offer a fee-free overpayments facility of at least 50% on all of our mortgage products.
Mortgage criteria will differ between lenders. You should always check your offer document and European Standardised Information Sheet for full details of any fees and charges payable.
For more information on our mortgage products please click here.