Mortgage Overpayments – What, Why & How?

Mortgage overpayments

Overpaying on your mortgage, either with a lump sum or by making larger monthly payments, may reduce the total amount of interest you have to pay on your loan, while also helping you to pay off your mortgage loan sooner. But is it worth doing or would you be better putting your money away in a savings account? Here we take a look at the "what, why and how" of mortgage overpayments.

 

What is a mortgage overpayment?

Your lender will set your monthly repayment amount when you take out your mortgage loan and will notify you of any interest rate changes affecting your monthly payments or when your fixed, discounted or tracker deal comes to an end. If your financial situation allows, you can overpay on your mortgage by making:

• Regular overpayments: You can set up a standing order to make a regular overpayment on top of your normal monthly payment
• Lump sum overpayments: Lump sum payments can be made as and when you want. If you make a lump sum overpayment of £1,000 or more this will result in an automatic recalculation of your monthly repayment. You can also ask us to reduce your remaining term and this may still result in a small change to your monthly payment

 

The type of overpayment you make will depend both on your individual circumstances and on the terms of your mortgage deal; what is best for one person is not necessarily best for another.

 

Why overpayments may work for you

Overpayments can reduce the size of your mortgage balance while also reducing the amount of interest you pay. This means that you could have less to pay in the future and may have a greater chance of repaying your mortgage in full earlier than you had originally planned.

 

How do I overpay with The Cambridge?

As a customer of The Cambridge, you can overpay on your mortgage by bank transfer, standing order, in branch or over the phone with a debit card.

Standing order is the easiest method for most customers as it allows you to adjust your overpayment in line with your needs and goals.

 

Confirmation of Payee

We are part of the Confirmation of Payee (CoP) service which makes sure UK Faster Payments aren't sent to the wrong account. It helps keep your money and accounts safe by checking the name on the payee’s account before funds are sent to us.

If you’re sending money electronically to your savings or mortgage account here with us, it's important that you include your full name, as it appears on your account. The CoP system will display the following responses when payments are being requested:

• Match - the name on the account matches and you can continue with the payment if you’re happy to do so
• Close match - the name on the account is not an exact match. It could be an abbreviated name or perhaps a spelling mistake. If you recognise the closely matched name, you can choose to continue or double check the payee details before continuing with the payment
• No match - the payee’s name details don’t match the name on the account. It’s very important that you double check the payee’s details to make sure you’re sending funds to the right place. If you are in any doubt, don’t continue with the payment

Warnings and responses might be worded differently, depending on your bank account provider.

When receiving a name match response, you may see within the payment confirmation screen that Barclays Bank PLC (or their logo) is displayed, along with the correct sort code 20-17-55, account number 40338346 and your name, rather than detailing The Cambridge Building Society (or our logo). This is because all money transfers are processed through our Head Office Collection Account with Barclays Bank.

A name match may not be possible if you’re sending funds to an account that you’ve recently opened with us, as it can take up to 48 hours for the new account details with us to appear within the CoP name checking system.

Get in touch with us straight away and let us know about any concerns if you think you may have been targeted as part of a scam. There’s some useful information here on our website where you’ll also find a link to Take Five to stop fraud.

 

Opting out of the CoP service

The purpose of the CoP service is to protect customers and their money. That’s why there are very limited circumstances where we would consider a request from a customer to opt out of the service (checking and confirming your account name matches).

If you feel you need to opt out, please contact us on 0345 601 3344 so that we can understand your circumstances and consider your request.

 

Further information

If you'd like more information about the CoP service, you can find out more here. 

For electronic payments into your account, use the following details:

• Name: This should match the name as it appears on the account you’re sending money to
• Sort Code: 20-17-55
• Account Number: 40338346
• Reference: This is your Cambridge Building Society account number, which will either be:
  • a 10-digit number or
  • the letters ‘CB’ followed by eight numbers. If your account number starts with ‘CB’, the digit following the letters is a zero e.g. CB01234567

You must quote this as a reference to ensure the payment reaches your account.

 

Payments from overseas

You can transfer money by telegraphic transfer (SWIFT) from overseas. To organise this transfer, the organisation sending the payment will need to quote the following details:

• SWIFT Code: BARCGB22
• Bank account name: Cambridge Building Society
• IBAN: GB27BARC20175540338346
• Reference: This is your Cambridge Building Society account number, which will either be:
  • a 10-digit number or
  • the letters ‘CB’ followed by eight numbers. If your account number starts with ‘CB’, the digit following the letters is a zero e.g. CB01234567

You must quote this as a reference to ensure the payment reaches your account.

• Amount: The actual amount to be sent, stating currency

 

Debit Card Payments

We accept payments by most major debit cards.

You can make a payment using your debit card at any of our branches or by calling our Contact Centre team on 0345 601 3344.

And some other things to think about

What if I use the money to top up my savings rather than overpay on my mortgage?

The savings that overpayments might help you achieve on your mortgage interest might amount to more than you could potentially earn in savings interest. However, this depends on your mortgage terms, your savings accounts, and your individual circumstances. You should ensure that you seek advice from a qualified financial adviser before making any decision regarding whether to save or overpay.

 

Consider any restrictions

Your mortgage deal may have certain restrictions on the maximum amount you can overpay without incurring an Early Repayment Charge (ERC). However, most deals will allow you to repay a fixed percentage of your original mortgage balance each year without incurring any charge.

The Cambridge allows overpayments on all its mortgage products. Because we charge daily interest on mortgage accounts, overpayments reduce the amount of interest you pay.

The amount you can overpay per year is set by the terms of your product. Depending on your individual mortgage, you may be able to overpay up to 10% per year or be able to make unlimited overpayments. If you would like to find out how much you’re able to pay you should check the terms and conditions of your mortgage. This information will be contained in your Mortgage Offer but if you can’t find the information, please get in touch with our Customer Contact Centre on 0345 601 3344 – they’ll be happy to help.

 

Consider the flexibility

Mortgage overpayments can give you flexibility with your account. For example, if you make regular overpayments you could repay your mortgage at an earlier date (reducing your term) or you can reduce the burden of your mortgage in the future by choosing to pay more now and then making lower monthly payments later on. This can be useful if you know your income is likely to go down in the future, perhaps when one person takes a work break to have children for example.

Overpayments can give you options. For example, with some mortgages you may be able to borrow the money back or have a payment holiday when your situation changes.

With The Cambridge if you’ve overpaid, you can apply to borrow some of the money back or to take a payment holiday when you revert to our Standard Variable Rate or your mortgage is on our Variable Home Loan Rate. This may give you greater flexibility and access to funds in the future.

 

Keep within your overpayment allowance

Depending on the terms of your mortgage product, you may have a limit on how much you can overpay each year. If you would like to check how much you can repay or have already overpaid and would like to find out how much allowance you have remaining, you should get in touch with our Customer Contact Centre for more information about your account.

 

Overpaying is not always straightforward

Some mortgage accounts are made up of more than one part. For Cambridge Building Society mortgages, the following applies:

• If the interest rates are different on different parts of your mortgage deal, the part with the highest interest rate will be reduced
• If interest rates are the same and there is an interest only part, the interest only part will be reduced 
• If interest rates and repayment types are the same, the part with the largest balance will be reduced

In the event that you don’t want your overpayment to follow the standard payment allocation detailed above, you’ll need to make a minimum payment of £1,000 and specify your requirements.  

If your overpayment fully repays a part of your mortgage, this part will be closed. Any overpayments made to the part which has been closed won’t be available to borrow back at a later date.

 

Making the decision

Knowing what will work best for you in the long run is not always easy. But there is help and advice available: try MoneySavingExpert and MoneyHelper for free guidance. Ultimately, you should seek professional financial advice before making any decisions.