if you were fixed and made overpayments, check that you are still overpaying

heather8

Our loan is with the nationwide, it was originally a fixed loan. We made some overpayments on the loan, which were were allowed to do.

However, what I didn't know was, that when the loan went on the SVR, the building soc, recalculated our new payment based on the reduced balance of the loan, not the amount we had originally borrowed. As time went by, this of course meant, that we were no longer making small overpayments.

After 6 months, of paying less than we should, I now have a standing order in place, so our payments are now back on track paying the original loan, so we are overpaying each month.

So if you have made overpayments, please check with your lender, that they have based your new monthly payments on the correct balance, as you may end up not repaying the loan as quickly as you thought.

In my example our original loan was 84000, but when they sent me a calculation for the new monthly payment, they had taken the new balance at 72000. This makes quite a difference to your monthly payment, but as interest rates had risen at the time from 4.39% to 6.5%, I just thought the payment was correct. It was only when the interest rates started coming down and I realised I was paying less at 4.5% than I was at 4.39% that I realised something was wrong and got in touch with the bulding soc.

I hope this makes sense.

feisty1

You could have requested them to recalcuate & reduce the term of the loan to keep the payments at the same monthly amount.......lots of clients choose to do it this way as they like to see the term reduced..........

uzubairu

feisty1 wrote: »

You could have requested them to recalcuate & reduce the term of the loan to keep the payments at the same monthly amount.......lots of clients choose to do it this way as they like to see the term reduced..........

That's what I have did a few months ago, and I just get a notification of the reduction in term every time I make my overpayment of £500 by standing order.

feisty1

Heather8: I have just read yr other post stating you have a split mortgage, this is the reason yr mortgage is being calculated as u've explained above

Lynn11

I believe that our lender nationwide is doing the smae with our overpayments. I spoke to them and they advised that they will keep the term the same but if you keep on making overpayments then it will reduce the term in the long run. We are happy with this at the moment and will be discussing any new deals in 2009 as our current deal runs out 30th May 2009 but as 2009 is going to be hard year we will keep the term deal and try to continue paying the overpayments, as we probably want to move to a larger house as our family grows so to reduce our term and then increase it later is not a good idea for us. We are happy to know that the mortgage amount is decreasing, although I do want to mortgage free prior to be 54.