Nationwide Mortgage

caracal_77

mollyisthedog wrote: »

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 !!!!!!!!!!

That's exactly what Trying to be Good is explaining to you above. If you keep overpaying, you'll by definition reduce the term. If you don't CONTINUE overpaying, then your monthly payments can reduce and your term can stay the same.

shorehambeach

Hi Molly

Its will automatically reduce your term.

Imagine you owe me £100.00 and agreed to pay me £1 a week

it would take 100 weeks to pay me back.

OK, lets over pay.

Pay me £2 a week and HEY PRESTO the debt is paid back in 50 weeks rather than 100.

Your not being thick, its just takes some time to get your head around figures.

sunshine54

i think there is a confusion between the term and the redemption date.

if you make overpayments they will be taken off your sum owed and the interest paid is therefore less over that year than it would have been had you only paid what's due.

quite correct this may reduce your lending to zero before 25 years have elapsed, but the redemption period is still 25 years but you can stop paying completely near the end
(although you might want to keep it active as a cheap source of a loan plus they will keep your deeds secure)

shorehambeach

Lizzy69 wrote: »

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!!!

Hi Lizzy

The answer, as you may have guessed, is YES.

Your term is based on the monthly payment X the number of months left on your total loan.

When you pay a lump sum (over £500) off your account you can either :

Chose to pay a bit less each month (so the mortgage still runs the remaining number of years but you pay a bit less each month)

OR

Reduce the length of the mortage term (if your payments are £500 a month and you over pay £500 then it basically takes one month off the term of your mortgage)

In your case (as you want to pay less than £500) it will just mean the term will become shorter by definition that you owe less.

Although technically they won't write to you and say 'Hey, your mortage is now shorter' it in fact is.

It will make a big difference overpaying a small sum each month - :T good luck

mollyisthedog

ohhhhhh, I see

I think I am confusing terms

was thinking redemption date was when you were fully paid up, but if you overpay then your balance could be zero before that ????

sorry, just got a little crazy there, this mortgage stuff will drive you nuts!

I did the repayment calculator thingie and it said if I overpay by £70 for the rest of the term, I will knock off 12 months, bringing it down from 5yrs 8 months to 4 yrs 8 months, so couldn't understand when NW said quite categorically that it would not reduce the term unless I overpaid by £500 (but that isn't allowed on my deal anyway), so I got it into my head I was throwing good money into a big black hole of nuffin :eek:

MrMicawber_2

A simple approach which has worked for me is to put your extra savings into a savings account (on which you will get some interest) and when this amounts to +£500 make a capital repayment which will allow you to immediately reduce your term or payment.

If you pay say £70 per month this will just 'sit' on the account until interest is next calculated or, depending on the rules of the mortgage until the overpayment reaches £500. Either way you are in effect giving interest away.

What I've done for years is save up to make a capital repayment and ask for the repayment to be reduced. This saves a bit of money which I add to my savings pot. Over a period of time it's amazing how the extra savings mount up.

Joe_Bloggs

@MrMicawber
The interest on a Nationwide mortgage is calculated daily so there is no need to package your saving and target it at a specific time to be able to take an overpayment opportunity.
I am all for making mortgage overpayments out of previously saved money. If you have no future demands for a part of your savings then overpay it, if it will benefit your financial situation. You may have to time your payments as some other lenders still have Dickensian practices in their small print.
J_B.