customer payment allocation -...

Customer payment allocationQuestions and answers booklet

MORTGAGES

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Introduction This booklet tries to answer any questions that you might have after reading the accompanying letter. It’ll help you to understand why we’re making Customer payment allocation available to you, how it works and how you might be able to reduce interest charges on your mortgage account.What is a Customer payment allocation? Your monthly payment consists of an amount that covers the interest due on each sub-account and where applicable an amount, the repayment part, that reduces what you owe. You can now take greater control and choose how you’d like to split the repayment part of your total monthly mortgage payment to each eligible sub-account. We call this a Customer payment allocation. The booklet doesn’t set out to explain all our policies and procedures that apply to your mortgage; it should be read in conjunction with the booklet that you would’ve received in March 2013, ‘Further information about your mortgage’, which can be viewed at www.halifax.co.uk/mortgages/pdf/further-information-about-your-mortgage.pdf

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ContentsThis booklet is in three sections:

Section Subject Page

1. All about Customer payment allocation. This will help you understand all about Customer payment allocation and how you might be able to reduce the interest charges on your mortgage account.

4.

2. How to use the illustrator tool.

Using the illustrator tool

Illustrator – examples

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3. Managing your Customer payment allocation.

Cancelling a Customer payment allocation

Changes to monthly payment

Overpayments

Interest rate changes

Daily interest sub-accounts

Reviewing your Customer payment allocation

10.

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Section 1 – All about Customer payment allocationWhat is a sub-account?Mortgages can have: • Different repayment methods, for

example interest-only or repayment.• Different types of interest rates,

for example fixed or variable.• Different mortgage terms, for

example 15 or 25 years.Sometimes your mortgage may be a combination of these and if so, we split it into different parts which we call sub-accounts. Your account may only have one or it could have several. Each sub-account will have a repayment method, interest rate, term and monthly payment.

How do you currently apply my monthly payments to these sub-accounts?When your total monthly payment is received we split it to give each sub-account the amount it is due. Interest-only sub-accounts receive an amount to cover interest due. For repayment sub-accounts the monthly payment also includes an amount (the repayment part) to reduce what you owe.

Why can’t I include all of my sub-accounts in my Customer payment allocation?Interest-only sub-accounts aren’t included as they do not have a repayment part. In addition, sub-account

98 (which contains the mortgage account fee) is also ineligible because we’ll refund the additional interest you’ve paid when you repay the account or switch to our latest mortgage conditions, whichever happens first – further information on this is detailed in the ‘Further information about your mortgage’ guide.

Will I always be able to take advantage of Customer payment allocation?We may decide to withdraw the facility in the future for some or all of our customers who have access to the facility. If we intend to do so, we will give you a reasonable period of notice. We’ve provided Customer payment allocation to help you manage your mortgage account. It does not form part of the terms and conditions of your mortgage.

Under what circumstances might you withdraw the facility?We may withdraw the facility if we think it is reasonable to do so. Examples of where we may decide to withdraw the facility are where:• You agree with us to change the terms

of your mortgage, for example, by transferring to our latest mortgage conditions, changing the repayment term, repayment method, getting a further advance, product transfer or transferring ownership of the property.

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• You have not used the facility since it was made available to you.

If we do decide to withdraw the facility for these or any other reason, we will give you a reasonable period of notice.

What should I consider when making my Customer payment allocation choices?You should consider such things as:• Your current interest rate, current rate

expiry date and your revert to rate.• What you think will happen to interest

rates in the future.• If you want to protect a particular rate,

for example, maintain a fixed rate sub-account if you think that interest rates will rise.

• If variable rates change, even if all or part of your mortgage is on a fixed rate, we’ll recalculate your total monthly payment.

• If the remaining terms on your eligible sub-accounts are different and you’re not allocating some of the repayment part to the sub-account with the shortest term – the next time your monthly payment is recalculated it’ll increase as there’ll be less time available to repay this sub-account.

• Depending on the selections you make, you could incur additional interest.

If you require further details on any of the above points, please contact us on the number detailed in the accompanying letter.

When can’t I apply for a Customer payment allocation?You can only apply for a Customer payment allocation if you’ve been invited to do so. However, you can’t apply if:• Your mortgage account is in arrears.• You are currently on a payment holiday.• You only have one repayment

sub-account (excluding sub-account 98- the Mortgage account fee sub-account).

If I apply for a Customer payment allocation when will changes be effective?Once we’ve successfully processed your application form, we’ll send you written confirmation which will include a breakdown of the new arrangement and confirm when it’ll become effective.

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Section 2 – How to use the illustrator toolHow do I use the illustrator tool?How to use this tool: • Type www.halifax.co.uk/CPA into your

Internet address bar.• Type in your sub-account details from

the table in the accompanying letter into the table of the illustrator tool.

• If you need to add further sub-account details, click the ‘Add sub-account’ button and repeat the above step.

Please note: do not include any shaded sub-accounts or the results will be wrong.• Enter a ‘% Allocation’ value for each

sub-account. This can be any percent from 0 to 100, but must total 100% across all eligible sub-accounts.

• When you’ve allocated 100% of your repayment part, click on the ‘Calculate’ button.

The tool will display the potential impact on the interest that you’d pay until a sub-account is forecast to be repaid or its term expires. The figures provided are a guide only and aren’t a precise calculation. You can try various combinations until you find the one which suits you best. The impact doesn’t reflect any future changes which may be made, for example when interest rates change or if you borrow additional funds.

What if I don’t have access to the Internet? You may visit one of our branches where you’ll be given access to the Internet, allowing you to use the illustrator tool. Please ensure you take your letter with you as you’ll need to enter your mortgage sub-account details. You could be asked to prove your identity and you may also be asked some security questions. Please note: our team members won’t be able to provide you with any advice on the most suitable choice for you to make.

Is the illustrator tool secure for me to use?Yes. The tool doesn’t need any personal information, so you can be assured that the details you enter are safe.

Can you show me how I could split the repayment part of my monthly mortgage payment?The following examples display how you could split the repayment part of your total monthly mortgage payment across your eligible sub-accounts. You’ll need to key your eligible sub-account information set out in the accompanying letter into the illustrator tool, an example of which is shown opposite:

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01 £1,500.18 6 years

6 months

£21.87 3.99% Variable N/A N/A

02 £63,507.58 6 years

6 months

£928.89 4.10% Fixed 30/06/2017 3.99%

06 £65,000.00 6 years

6 months

£918.26 3.00% Fixed 30/06/2016 3.99%

99 £450.00 6 years

6 months


You then need to split the repayment part of your monthly payment to show what percentage you’d like to allocate to each sub-account. For example, the full amount can be allocated to just one sub-account or split across several.The following tables show three examples of how you could split the repayment part of your monthly payment. When you’ve done this, the illustrator tool will forecast the likely reduction or increase in the overall interest charges until a sub-account is repaid or its term expires.

Please note: the Customer payment allocation will automatically cancel when a sub-account is repaid or its term expires. Whilst we offer this facility, we’ll invite you to reapply for a new Customer payment allocation.

Example one:

Sub-account number % allocated Potential impact

01 25% Decrease in interest of £6.89

02 75% Decrease in interest of £8.07

06 0% Increase in interest of £11.01


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Based on your chosen allocations, our illustrator shows that the overall impact to your mortgage could be a decrease in interest of £3.86. The overall impact is forecast until the expiry of your next sub-account. By changing the way you allocate the repayment part of your monthly payments this may result in some of your sub-accounts being repaid earlier than the remaining term.This interest saving is gained by applying the majority of the repayment part to the sub-account with the highest current interest rate, and the rest going to one of the sub-accounts with the next highest current interest rate.Example two:

Sub-account number % allocated Potential impact


02 100% Decrease in interest of £2,269.18

06 0% Increase in interest of £1,808.74


Based on your chosen allocations, our illustrator shows that the overall impact to your mortgage could be a decrease in interest of £398.11. The overall impact is forecast until the expiry of your next sub-account. By changing the way you allocate the repayment part of your monthly payments this may result in some of your sub-accounts being repaid earlier than the remaining term.This interest saving is gained by applying the full amount of the repayment part to the sub-account which has the highest current interest rate.

Example three:

mortgage couldSub-account number % allocated Potential impact


02 0% Increase in interest of £2,190.00

06 100% Decrease in interest of £1,863.98


Based on your chosen allocations, our illustrator shows that the overall impact to your mortgage could be an increase in interest of £391.51. The overall impact is forecast until the expiry of your next sub-account. By changing the way you allocate the repayment part of your monthly payments this may result in some of your sub-accounts being repaid earlier than the remaining term.The increase in interest is due to the full repayment part being applied to the sub-account with the lowest current interest rate.

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Please note: the results provided are a guide only and are based on the information that has been entered. They don’t reflect any future changes to your sub-accounts e.g. interest rate changes.

Important illustrator assumptions:• Interest – interest is calculated

and added to the mortgage account monthly.

• Interest rates – are stated and used at their current level, where variable these can change. Where your mortgage has multiple future interest rates, we assume that on expiry of the current interest rate the next interest rate will apply for the remainder of the term.

• Mortgage year – starts on 1st January and ends on 31st December.

• Overpayments, underpayments and payment holidays – these are not taken into account.

• Potential impact – by changing the way you allocate the repayment part of your monthly payments this may result in some of your sub-accounts being repaid earlier than the current term date.

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Section 3 – Managing your Customer payment allocationCan I cancel my Customer payment allocation?You can ask us to cancel your Customer payment allocation at anytime by writing to us, ensuring that all account holders and guarantors have signed and dated the letter.

What would cause the automatic cancellation of my Customer payment allocation?Some significant transactions will automatically cancel your Customer payment allocation. Examples of changes which will result in automatic cancellation are:• You take out additional borrowing on

your mortgage.

• Any of your repayment sub-accounts are repaid, excluding sub-account 98.

• There are changes to mortgage account holders i.e. change of ownership.

• You extend or reduce the overall term of your mortgage.

• You extend or reduce the term on any of your repayment sub-accounts, excluding sub-account 98.

• You change the repayment type e.g. from repayment to interest-only.

• You switch to a new mortgage product.

What happens following the cancellation of a Customer payment allocation?We’ll write to you and confirm that your Customer payment allocation has been cancelled, the effective date of the cancellation and your new monthly payment. At this point your payment allocation will revert to the standard payment allocation, which is detailed in the ‘Further information about your mortgage’ guide.Whilst we offer this facility, if the Customer payment allocation is automatically cancelled, we’ll invite you to reapply for a new Customer payment allocation.

Changes to monthly payment:

How will my monthly payment change once my Customer payment allocation ends?The following tables demonstrate how your sub-accounts may change after your Customer payment allocation has ended.

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Example one:This table shows your sub-account position prior to applying for a Customer payment allocation.

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01 £1,500.18 Repayment 6 years

6 months



6 months

£928.89 4.10% Fixed 30/06/2017 3.99%


6 months

£918.26 3.00% Fixed 30/06/2016 3.99%

98 £62.40 Repayment 6 years

6 months

£0.80 0.00% Fixed N/A N/A


6 months


Total £130,520.16 £1,876.38

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If your Customer payment allocation applied 100% of the available repayment part to sub-account 02 and assuming that no other significant changes occurred to the mortgage account, the table below displays what the mortgage account may look like after the Customer payment allocation has ended.

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4 months

£1,737.80 3.99% Variable N/A N/A


4 months

£0.80 0.00% Fixed N/A N/A


4 months


Total £66,968.41 £1,790.74

Sub-account 02 has had the outstanding balance repaid earlier than the remaining term of 6 years and 6 months, as this has had the full repayment part of the monthly payment applied to it. Consequently, this sub-account has been closed.As sub-account 02 has closed the mortgage payment will be recalculated, this has resulted in increased monthly payments on the eligible sub-accounts. This increase is because the full monthly repayment part was applied to sub-account 02, meaning the other balances haven’t been reducing during the time that the Customer payment allocation has been in force. The remaining sub-account payments will increase to ensure that the outstanding balances are repaid by the end of the mortgage term, however, the overall monthly payment has reduced.

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Example two:This table shows your sub-account position prior to applying for a Customer payment allocation.

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6 months

£668.64 4.25% Fixed N/A N/A


0 months



6 months

£0.80 0.00% Fixed N/A N/A

Total £91,069.76 £1,507.32

If your Customer payment allocation applied 100% of the available repayment part to sub-account 01 and assuming that no other significant changes occurred to the mortgage account, the table below displays what the mortgage account may look like after the Customer payment allocation has ended.

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3 months

£1,764.72 3.99% Variable N/A N/A


9 months

£0.80 0.00% Fixed N/A N/A

Total £45,534.93 £1,765.52

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Sub-account 01 has had the outstanding balance repaid earlier than the remaining term of 6 years and 6 months, as this has had the full repayment part of the monthly payment applied to it. Consequently, this sub-account has been closed.Similar to example 1, as sub-account 01 has closed, the remaining sub-accounts have had their monthly payments recalculated. The monthly payment to sub-account 02 has increased to ensure that the outstanding balance is repaid by the end of the mortgage term, this has resulted in the overall monthly payment increasing.Please note: If you’re not reducing the amount you owe on one or more of your sub-accounts, the next time we recalculate the sub-account monthly payment, it’ll go up. Think carefully about whether you can afford an increase in your monthly payment in the future.

Overpayments:

Whilst my Customer payment allocation is in force can I make overpayments?Yes. You must contact us so we can discuss the most appropriate method for you to make the overpayment and we’ll explain how the payment will be applied. Your monthly payment and any agreed overpayment must be received as one amount, to ensure that it is applied in line with your Customer payment allocation.

Will my Customer payment allocation apply to an unexpected overpayment on my mortgage?Any unexpected overpayments made to your mortgage may not be allocated in line with your Customer payment allocation. If you require further details on how your payment will be applied, please contact us on the number detailed in the accompanying letter.

Interest rate changes:Will interest rate changes affect my Customer payment allocation?No. Changes in interest rates won’t affect your existing Customer payment allocation. We’ll recalculate your monthly payment and notify you of any changes. You should, however, review your Customer payment allocation following an interest rate change to ensure that it continues to meet your needs.

Daily interest sub-accounts:How does allocating 0% to any of my sub-accounts affect them?On these sub-accounts you’ll have to pay the interest on the outstanding balance.However, even if you’ve chosen not to allocate any repayment to these sub-accounts you’ll still see the balance reduce slightly, due to the way that we project monthly interest charges.

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Reviewing your Customer payment allocation:How often should I review my Customer payment allocation?You should review your Customer payment allocation on a regular basis. To do this please call us and we will send you the information you need to enable this.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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How to ComplainOur promise is to do our best to resolve any problem you have immediately. Where we can’t, we’ll ensure you know who is dealing with your complaint.

To complain: • Visit a branch and speak to any member of the team. • Call our Telephone Banking Service on 08457 25 35 19.

(Textphone 08457 32 34 36, if you have a hearing impairment.)• Write to us at Halifax, PO Box 548, Leeds LS1 1WL. If you’re still not happy and we can’t put things right to your satisfaction, you can ask the Financial Ombudsman Service to look at your complaint – provided you have tried to resolve the matter directly with us first. We hope you won’t need to contact the Financial Ombudsman Service but if you do, we’ll tell you how to do this.

Do you need extra help?We want to help our customers in any way we can. If you have a hearing or speech impairment you can use Text Relay (previously Typetalk) or Textphone on 08457 32 34 36 (lines are open seven days a week 9am–5.30pm). We can provide brochures and other documents in large print, Braille, CD and audio tape. Please ask a member of staff if you’d like individual pieces of literature in any other formats or would like to know more.

All information correct as of January 2014.Halifax is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 169628. Telephone calls may be monitored or recorded.

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