Nationwide Mortgage

Lizzy69_2

Hi there :hello:

We are currently on a Nationwide SVR repayment mortgage and today received a letter informing us they have cut the interest rate to 3.5% as from 1st February 2009 :T

This is where I need some help. We would like to overpay by a small amount each month to reduce the term rather than the interest.

The FAQ's on the reverse of the letter mentions "Any overpayments of £1 or more will give interest benefit from the following day. If you make an overpayment of £500 or more you can choose to reduce your monthly payment or reduce your term (if you have a repayment mortgage). You don't need to tell us every time you make an overpayment - it's automatic"

We can't afford to overpay by £500, but we can overpay by the amount that we would save from the new rate. From the above does this mean that the term is reduced automatically?

Thanks for any help!!!

FrugleRock

As long as you tell them when you first do it to take it off of the term and not the balance then yeah you should be able to just overpay the amount you want to.

HTH

Thriftyknickers

No, the term will stay the same. Your monthly payments that they will expect from you will also stay the same. You will be able to see the additional payment on the Nationwide Online Bank though :j but I think they only recalculate monthly payments if the mortgage rate changes, when you get your mortgage statement or when you overpay by £500 or more. The term will only change if you request it after paying £500 or more. Hope this helps! Our Nationwide Tracker is coming to an end so it looks like we'll be opting for the SVR at 3.5% too - it looks good!

stylus360

Just get online and transfer anything extra into the mortage, anything over £500 and they send you letter to reduce your payment.
If you want to reduce the term instead you need to contact them. I did this as i started out with 25 year mortage, overpayed and reduced it to a 9 year one as if its under 10 years you do not have to pay any redemption fees :j

Since i have now payed off my mortage (9 years/large deposit) i requested to keep £1 in the a/c. I have used this on many occasions to borrow money.

Bought my last car for £16k the using the mortage and had it over 9 years, again overpayed as/when i liked and have payed just £250 interest on it. It just shows as MORTAGE FURTHER ADVANCE. Again each time overpayed by £500 in month payments were reduced.

You will need to open a Flexaccount in order to transfer funds into the mortage a/s though.

Looking at another house at the moment and will prob use same method.

mollyisthedog

I don't understand.

If you make regular (less than £500) overpayments why doesn't the term reduce. Surely you will pay it off quicker if you are reducing the capital ?

We want to overpay by £70/month but I am told we will not pay off the mortgage quicker. How can this be?????

Trying_to_be_good

Nationwide will lower the standard monthly payment you make to them - if you keep the total amount you pay to them the same (i.e. overpay by a bit more each month) your term will reduce as you will have paid back the capital owed sooner. Because they assume you want to keep the term the same the monthly payment reduces, but you have the option of just paying that lower standard monthly payment should you need to (i.e. not overpaying).

You aren't losing out - just the way the computer assumes you want the payment used.

mollyisthedog

none the wiser, I'm afraid

Trying_to_be_good

OK - there are two ways your lender can treat an overpayment:

1. They keep the monthly payment the same, but shorten the term; or
2. They keep the term the same, but reduce the monthly payment.

So, Nationwide have said they will keep the term the same, but reduce your monthly payment.

BUT, if you keep the total you are paying each month the same, i.e. the first month you overpay by £70, and this reduces the monthly payment by £10, the second month you would overpay by £80 (the original £70 overpayment, plus the £10 to make the standard monthly payment up to the original amount). This would keep the TOTAL monthly payment the same, and would (by definition) shortern the term as you would be overpaying more and more each month. A snowball calculator (http://forums.moneysavingexpert.com/showthread.html?t=155707) will give you the figures, as Nationwide have said they won't.

Lizzy69_2

Hi there :wave:

Still a bit confused about this.

OK, our mortgage payment is by direct debit and Nationwide state at the bottom of the letter "we will collect your new monthly payments automatically". This I understand completely, they will only take out the new payment from February 2009.

I also understand that we can make overpayments over the counter at any branch (we don't have a Flex Account or current account with Nationwide) by cheque or cash or by setting up a standing order.

However what I am not clear about is if we are not going to overpaying by £500 will the Nationwide reduce the term or the monthly payment? surely they won't send a letter every month to say the payment wil be reducing will they??????

Any ideas anyone please?

sunshine54

if you pay below £500 the term will not reduce and the payment will not reduce until the next recalculation.
the payment you make is recalculated once a year or at the next rate change.
there is a benefit in reducing your loan and saving on interest by overpaying.

mollyisthedog

thanks to the previous posters but I'm with Lizzy on this

I don't understand and must be wording my question poorly :mad:

I want to reduce my term

why does overpaying by £70/month NOT REDUCE MY TERM???????????

where does the money go? If I reduce capital each month, surely it will get to zero before the redemption date, effectively REDUCING THE TERM !!!!!!!!!!

does this mean then I will overpay £70/month until the original redemption date ie. pay MORE than I should ???????

we have previously made several lump sum overpayments, but on susequent statements the redemption date is still the original one, so where has my money gone ????

sorry for being fick