Overpayment Fee

rlfan82

Hi, as I posted in 'savings' forum...

Me and my Wife are due to inherit some money which we wish to clear our mortgage with. Natiowide appear to carge a £3600 overpayment penalty

Question is, if we invested the money and paid off the mortgage in 4 years time, after the fixed rate is up, do penalty's for paying off the mortgage still apply?

Locoblade

How did you work out the £3600 figure?

Once you've finished your fix rate then no, Nationwide have no early repayment charges as far as I know, but check your mortgage literature to be sure

rlfan82

Thanks for the reply - scratch the 3600, i saw that on my contract i think

just seen website and it says 5% as we are on 5yr fixed, which means on £110, we'd have to pay 5,500 as a fee

Looks like high interest account for 4 more years it is!

bloody stupid int it, banks have no money, yet it costs u 6 grand to pay back money u borrowed

_Andy_

Nothing stupid about it. What you could do is rather than pay back the whole amount, pay back what you can without being charged - most fixed rates will allow a degree of overpayments.

Locoblade

Yup, Nationwide is generally £500 a month overpayment I think.

I would check your own documentation though, as its quite possible that Nationwide have put up the ERC on their latest loans given the current climate, so given that you took yours out last year(?), you might find its less.

straddie

I believe Nationwide allow overpayments of up to £500 a month without incurring a fee, so you could simply spread your overpayment out over several months, leaving the balance in a high interest account in the meantime, and get your mortgage balance down that way.

andrewmoorcroft

Ask them 'what is the maximum overpayment i can make without it being knocked off the capital'. Pay this amount at the end of December and they can't help but knock it off the capital on the 31st Dec anyway.
New capital = old capital + interest - payments received!
This is a loop hole to get around the part redemption penalty.
If uve got a good rate, chances are that you can get a fixed rate ISA that makes more than your interest on your mortgage but you can only invest £3600 per year.

adandem

Ours is with YBS and we can overpay 10% of the loan per year without incurring charges.
However, it might be worth finding out if you save more by paying the ERC and clearing your mortgage?
Also, our ERC decreases with the life of the mortgage, is this the case with yours?