Pls can you help me work this out..

Feanor

Hi,

Our fixed rate ended in June 09 and payments went from £1162 down to £795. We have now decided to overpay by £205 a month to try and get some equity built up.

What I am wondering is, as we decrease the amount we owe, does our payment (as in the original £795) go down, and at which point would nationwide recalculate it? Do they do it every year? Obviously if the interest rate (2.5% currently) changes then they will recalculate but what if it stays the same for a while. When will our payments go down again?

I hope this made sense!
Thanks

KathysBoy

Feanor wrote: »

Hi,

Our fixed rate ended in June 09 and payments went from £1162 down to £795. We have now decided to overpay by £205 a month to try and get some equity built up.

What I am wondering is, as we decrease the amount we owe, does our payment (as in the original £795) go down, and at which point would nationwide recalculate it? Do they do it every year? Obviously if the interest rate (2.5% currently) changes then they will recalculate but what if it stays the same for a while. When will our payments go down again?

I hope this made sense!
Thanks

Assuming its a standard repayment mortgage, then if the interest rate stays the same your payments will not change. This is because they calculate the repayments so that it fully repays the loan and interest over the period. This means that early on a larger sum goes towards paying the interest, and in the later years it reverses so that a larger sum goes towards repaying the capital.

ViolaLass

I'm assuming the OP means will the overpayments shorten the term or lower the monthly payment. Short answer is 'you choose'. Tell Nationwide which you want - I believe they will assume you want the monthly payments lowered unless you tell them otherwise but best to check with them.

Joe_Bloggs

There is an Overpayment Preferences option available when you view your mortgage online with the Nationwide. This gives you three options:-
1) Pay off your mortgage earlier by reducing your mortgage term.
2) Reduce your future monthly repayments.
3) Keep your existing payment and term 'as is'. At the next natural mortgage payment change, i.e. interest rate change, your repayment will be automatically recalculated.
You can select one of these and submit a preference.
J_B.

Feanor

Thank you so much for your help. I really appreciate that. I am going to call Nationwide tonight and find out what our preference is set to.

Feanor