When a client asks about overpaying
Clients ask their broker whether to overpay the mortgage with a bonus or savings. The parts of that question you can answer, the comparison you cannot, and how to hand it over.
Clients ask their broker whether to overpay the mortgage with a bonus or savings. The parts of that question you can answer, the comparison you cannot, and how to hand it over.
A client with a bonus, an inheritance or savings building up asks whether to overpay their mortgage. They ask you because you arranged the mortgage. Part of the answer is yours. The part that compares overpaying with saving into a pension or investing is not.
How much the client can overpay each year on their current deal without an early repayment charge.
on anything above the allowance, and when it ends.
Whether the lender reduces the monthly payment or the term after an overpayment, and whether the client can choose.
Whether the lender allows the client to draw back overpayments, and on what terms. On many deals it cannot be withdrawn once paid.
How an offset arrangement works, where it is available and suits the client.
These are facts about the mortgage. Set them out in writing so the client and any planner can use them.
If the client's deal ends soon, a lump sum can be paid off at product expiry without a charge. Give the client the date, the balance and what a new deal on a smaller balance might look like, so they can decide on timing.
Whether overpaying the mortgage would serve the client better than paying into a pension, an ISA or other investments is a comparison of investment outcomes. It depends on tax relief, the mortgage rate, likely investment returns, the client's age, their need for access to the money and their attitude to risk. That comparison is regulated investment and pension advice.
Telling the client which to do, even informally, is advice. You can tell them what the comparison involves and offer an introduction for the advice.
Personal pension contributions receive tax relief at the client's marginal rate, within the annual allowance and up to their relevant UK earnings. The annual allowance is £60,000. It is lower for high earners under the tapered allowance and for those who have set off the money purchase annual allowance.
Some employers match additional contributions or offer salary sacrifice. Money in a pension can usually be accessed only from the minimum pension age, which is 55 and rises to 57 from 6 April 2028. Applying these facts to the client's situation is pension advice.
A client with a lump sum faces a wider set of choices than one overpaying from monthly income. They may be able to clear the mortgage, reduce it at the next product expiry without charges, invest the money or use it for a pension contribution, subject to the allowances and their earnings.
An inheritance may also come with an inherited pension or investments, each with its own tax position. A bonus may be paid through salary sacrifice into a pension if the employer offers it, which has to be decided before the bonus is paid. Find out the source, the amount and any deadline, and make the introduction early enough for the client to have a choice.
Money overpaid on a mortgage is usually locked into the property. Money in a pension is locked until the minimum pension age. Money in cash or an ISA can be drawn when needed. A client who uses all their spare cash to overpay may have nothing to draw on if their income stops.
You can point out that an overpayment may not be retrievable. Income protection, which you may advise on, is part of the same conversation.
A client who has no accessible savings and overpays may find that a later emergency has to be met with borrowing at a higher cost. Point out the trade-off as a fact about access, and leave the comparison with other uses of the money to the planner.
Give the client the mortgage figures, then make the offer: "I can tell you what overpaying does to your mortgage. Whether the money would do more for you in a pension or invested is a different question, and I do not advise on it. A planner at Equity & General can compare the options with your figures. Would you like me to put you in touch?"
With the client's consent, send the planner the overpayment allowance, the charges and the effect on term and payments. The planner can then advise on the comparison with accurate mortgage information.
No. Describing it as safe or better is a comparison with other uses of the money, which is investment advice. You can explain what overpaying does to the mortgage.
Then the decision is theirs. Give them the mortgage figures and process the overpayment. Offer the introduction once, and record the answer.
An offset mortgage lets savings reduce the interest charged while remaining accessible. Whether it suits the client is mortgage advice, which you can give.
Six points in an ordinary mortgage case where a wider financial conversation opens naturally, and how the introduction to Equity & General handles each one.
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How the work divides between you and E&G: what stays with you, what passes to us, and the regulatory line between introducing and advising.
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How a one-off referral fee compares with a share in the ongoing value of the advice, for your income and for what your firm is worth.
Read itYour firm keeps the mortgage and protection advice. Equity & General gives the pension, investment and estate planning advice, and a named partnership manager sets the arrangement up with you.