Are there mortgages with unlimited overpayments?
Answered on 20 February 2019
Which mortgage lenders allow unlimited overpayments?
Mortgages with unlimited overpayments
Nearly every lender has a product which allows unlimited overpayments, even if it is only their standard variable rate (SVR) and the rate is not particulary competitive.
My question to you would be "do you really need a mortgage with unlimited overpayment facility?" Most mortgage products nowadays allow up to 10% of the mortgage debt to be repaid without penalty each year and there are others that allow up to 20% without compromising on the rate.
Unlimited overpayment mortgage lenders
If you really do want to make unlimited overpayments then you should look for products with no early repayment charges or products that allow you to repay all but £1 without charge. You will pay for the extra flexibility but Coventry, Northern Rock, Hinckley & Rugby, Newbury, Nottingham, Leeds, Principality, ING Direct and Metro Bank all have variable rate mortgages that allow unlimited overpayments.
Offset and current account mortgages for increased flexibility
Whilst these lenders allow overpayments and some of them will allow you take payment holidays or underpayments against any banked credits, not all of them will allow you to borrow the money back should your situation change. The most flexible mortgages available are offset mortgages and current account mortgages. With an offset mortgage you can make overpayments into a linked savings or current account and instead of receiving interest on the investment the savings balance is used to offset the mortgage balance before calculating the interest charged on your mortgage. You can then elect to either pay a reduced monthly payment or keep your monthly payments the same and reduce your capital balance quicker. As the overpayments are held in a savings/current account they can be accessed at any point in the future should you need the funds.
A current account mortgage operates as one account with the mortgage debt, current account balance and even credit card debts all held in one big pot. It takes a bit of getting used to seeing a current account debt of say £125,000, but for the financially astute it can be one of the quickest ways to repay your mortgage. Unfortunately these current account mortgages are very thin on the ground at the moment.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0330 433 2927 or submit an enquiry to discuss this with one of our consultants.
Ask The Mortgage Experts answers are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We recommend you seek professional advice with regard to any of these topics where appropriate.