A 'No overhang' option means that the mortgage scheme will allow you to repay the loan without penalty once the benefit period has ended (ie. the mortgage does have an Early Redemption Charge but it does not last longer than the fixed, capped or discount period).

This means that a mortgage with, for example, a discount to 31st January 2006 will have a redemption charge to either the same date or a date prior to this.

The Early Redemption Charge can represent a significant sum although the amount will differ between lenders and between products.

With 'No overhang' mortgages you will only have to pay this redemption fee if you redeem the loan or remortgage whilst you are still subject to the scheme's special rate.

Once you have reverted to paying the lender's Standard Variable Rate (SVR) you will be able to redeem the loan without penalty (although there may still be other costs such as sealing fees and legal fees.)

As a consequence of not locking-in the borrower to the lender's SVR, the rate offered on these schemes will usually not be as competitive as for rates with redemption overhangs, making them most suitable for those who wish to benefit from a lower initial rate without needing a very low initial rate, and who are likely to want to remortgage to another Discount, Fix or Cap once they are no longer benefiting from the initial rate.

For more information about No Overhang, contact one of our independent advisers.