Which Mortgage to Overpay ?

gkb_2

A bit of advice please, we have 3 mortgage products,

1 repayment at 2.5% (SVR),
1 interest only at 2.5% (SVR) and
1 interest only at 3.14% (tracker),

as the Nationwide have kindly refused to offer us any product at the moment as we allegedly have no equity in the property we are planning to overpay the savings we are making from recently dropping to the SVR from a higher fixed rate.

This is the question, which should we overpay ?,
the higher rate one even though it is fixed at 1.14% above base for another 2 years, the repayment or interest only ones on the SVR at 2% above base and if so which one repayment or interest only ?

Many thanks, never been in the position to not get a deal before so need to make the best of it for when the rates start to rise again.

getmore4less

If the tracker is fixed at 1.14% above base why is it 3.14%?

what does the tracker revert to after 2years?

Any penalties or limits for overpayments?

I would start overpaying the highest rate an switch if that changes.

If there are no limits on overpayments it makes no difference on the I/O or repayment.

If there are limits(that you hit) then are there an option to keep the normal payments the same and still overpay?

Can you clawback any overpayments? this may give choices if the rates change.

Can you adjust the term of any of these without fees, that gives other options to vary payments.

gkb_2

THanks for that, a few more detail below,

getmore4less wrote: »

If the tracker is fixed at 1.14% above base why is it 3.14%?

There is a collar of 2% so I have until the rate gets to above 2% until this changes

getmore4less wrote: »

what does the tracker revert to after 2years?

good point, as the Nationwide have invented a Mortgage Variable Rate for coming off new products which I believe is nearer 4% I need to check, took this out in July 08

getmore4less wrote: »

Any penalties or limits for overpayments?

think its 10% on tracker, none on SVR but the amounts we are looking at will not be massive

getmore4less wrote: »

I would start overpaying the highest rate an switch if that changes.
If there are no limits on overpayments it makes no difference on the I/O or repayment.

If there are limits(that you hit) then are there an option to keep the normal payments the same and still overpay?

that was my thought it was just if there is any benefit between repayment and interest

getmore4less wrote: »

Can you clawback any overpayments? this may give choices if the rates change.

Will check this as maybe useful in the future

getmore4less wrote: »

Can you adjust the term of any of these without fees, that gives other options to vary payments.

Dont think so without penalties

Seem that it is as simple as I though, overpay the one with the highest rate, as they no longer offer a SVR which is as low as 2% above base I have in effect got a tracker without the fees so I just need to pay as much as possible before the rates start to go up.

Trying_to_be_good

Personally, I'd overpay the IO BMR part, as if rates rise, your tracker will stay low (until the collar is reached).

For me, it would also matter if I could clear one part, though - so I might be tempted to pay the lowest value part to get rid of it.

Nationwide do normally allow the term to be changed without penalties, so worth looking into.

jamesd

I'd go with the repayment one because being left with the interest only mortgages leaves you with more flexibility to keep payments low in the future if you suffer some financial stress like job loss.

The collar on the tracker looks likely to keep that at a reasonable rate for some time yet.

Joe_Bloggs

@gkb I am on a collared tracker with Nationwide. I can only make £500 max overpayments per mortgage without an early repayment penalty. This penalty is proportional to the amount of time that the tracker has to run. Check your mortgage paperwork to find what specific terms and conditions are in force.

I face the SVR ( in Nationwide speak BMR) rather than the SMR rate next year. There are no limits once on BMR. I have a regular saver in anticipation of this occasion.
J_B.
BMR. Basic Mortgage Rate
SMR. Standard Mortgage Rate