Mortgage over paying

Paul_T_Newby

Hi all,

I have had a 5 fixed rate mortgage with nationwide, with the five year fixed ending next year. so will be looking at re-mortgaging.

I have been advised by a number people to choose a new mortgage that allows free over payments.

I was wondering by how much it is worth over paying, and by how much could this reduce the length of the mortgage?

Many thanks.

My Newby

Radiantsoul

I wouldn't be in too much of a hurry to remortgage if I were you as you will probably drop onto their standard variable rate(capped to 2% over base). And you can overpay as much as you like.

_Andy_

Agreed.
also you can already overpay by up to £500 a month on your current product.
Nearly all mortgage products will allow some degree of overpaying.
only worth getting one that allows unlimited overpayments if you are realistically going to be making large overpayments on a regular basis.

MORPH3US

How much should you overpay? As much as you can afford... like any debt get it paid off as quick as possible and save £££'s in interest.

That said, don't go mad and pay it off at the expense of living you life and having some fun now and then. Also depending on the rate of the mortgage, if you can get a better rate for saving then stick it in savings instead of your mortgage.

When your fixed rate finishes and you go onto the SVR, you should be able to overpay unlimited amounts without penalty.

On my HSBC fixed rate I can overpay 20% of my normal monthly payment each month but all banks and mortgages vary so check with the banks.

Lynn11

While you are on the fixed deal with nationwide you can overpay up to a maximum of £500 per month until your deal finishes and when you can make unlimited overpayments. I currently overpay my fixed deal with nationwide. it can reduce the term or the mortgage amount so that when you do decide to remortgage you can reduce the remaining yrs left as you have paid off more than required.

_bankrupted

That is like asking how long is a piece of string??

The ultimate "over paying" mortgage is the one account. But this type of account requires financial discipline.

But as an indication for you to chew over.

100k over 25 years (300 months) at 5% = £584 per month

if you over pay by £x per month then you will pay off your mortgage as follows

£200 extra = 182 months ( Saving £35.2k )
£100 extra = 225 months ( Saving £21.3k )
£50 extra = 257 months ( Saving £12.2k )

_Bankrupted

Joe_Bloggs

MSE Martin asks the questions and highlights scenarios here. I do not think there is anything bad about the flexibility of the Nationwide approach. Perhaps the £500 per mortgage overpayment limit per month has been fixed too long in my view. As stated above there no limit once on BMR.

J_B.

Berkshiregirl

http://www.whatmortgage.co.uk/calculators/fleximortgage.html

A nifty calculator to work out the effect of overpayments.

katie310185

i have NR together product i overpay 500 per month and have reduced my mortgage bu 5 in 3 years when you work it out properly its quite a lot considering i got 100 percent mortgage 152k now owe 142 and im on 7.2 percent so it saves us loads of money each month

Joe_Bloggs

What is often missed with these overpayment situations is the 'opportunity cost' of doing something else with the overpayments. Once you take this into consideration then the net savings are less.

If you have a high mortgage rate then you probably won't be able to beat it with savings accounts, cash ISAs etc. If you have a low mortgage interest rate then perhaps you can, if you shop around for the best rates.

MSE Martin does compare a mortgage rate with overpayments and the same mortgage rate with separate savings accounts in the link I made in a previous post above.

J_B.

Paul_T_Newby

Thanks all for the detailed feedback.

It sounds over paying is only worthwhile if commited to over paying for the duration of the mortgage.

As my 5 year fixed rate ends next december, i think i will just be looking for the best rate i can when renew rather than looking at overpayment options.

Hopfully the rate will still be low and can bet better than 4.9 my current rate.

I have enquired about switching early but nationwide dont allow it with out a big penalty