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Hi,

My partner and I have been overpaying her interest only mortgage in order to try to reduce the capital.

Due to changes in our circumstances we can no longer do this and have reduced the monthly payments back to the original.

 

We could do with some extra money over xmas and wondered if we can recover the overpayments made this year?

 

As I understand things the interest is added at the start of the year so as long as we pay that amount over the year then we should not have a problem.

 

I'm not sure if the Building Societies year runs Jan-Dec or April-March but can find that out.

 

Your valued advice would be appreciated.

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I think you would be best off talking to your lender. However, I hope you realise that mortgage interest rates are starting to go up and if it isn't a fixed interest mortgage then you could find yourself with new problems later on in the New Year.

 

I know this doesn't specifically address your question, that any time at the moment is a bad time to borrow – and be motivated by a short-term need of a Christmas is may be a particularly bad reason.


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You cant recover over payments made to a Mortgage


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you need to find out and understand how this overpayment is applied to your mortgage as you cannot overpay an interest only mortgage in the way that you can for a repayment mortgage. What will generally happen is the extra money goes into a separate nominal account asnd doesnt come off the capital you borrowed until the mortgage provider receives clear instructions of what you want to do with the money. If you dont tell them then it will sit there for ever. Ths means you may well be in a position to take a "payment holiday" and the months mortgate interest you would normally pay would come out of this pot rather than your bank account but this will not be automatic, you have to speak to them. You wont be able to recover the payment as cash without some difficulty but offsetting a month's payment shouldnt attract any costs.

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