Nationwide Reducing Monthly Payment After I Overpay.... Grr!

roses

Hi, since August I have been overpaying slightly on my mortgage each month. What I didn't notice is that each month they have been reducing my standard monthly repayment "to keep the mortgage term the same", totally negating the effect of me making the overpayment!

You can call them up to change your standard monthly payment back but if you have a mortgage and you overpay, please check your monthly payment has not changed!

It states on their website that repayment mortgages (what I have), you are supposed to be given the choice:
http://www.nationwide.co.uk/mortgages/existingcustomers/overpayments.htm

With repayment mortgages you can choose whether to reduce your monthly payment ..................You will need to advise us of your preference when you make your overpayment.

I was not given this choice, I think I'll write to complain.

I am so annoyed!!

MrsManda

How have you not been given the choice? If you log on to your account you have the option of selecting whether you reduce your monthly payment or reduce your term.
Unless you have requested not to get letters regarding your mortgage you should have also been sent a letter after your first overpayment which states that they've reduced your payment.

dimbo61

Your overpayments have made an effect in that you now owe less money to Nationwide and have less debts.
All you need to do is ring up the nice lady at Nationwide and ask can you have your mortgage payments fixed at £XXX each month until further notice and overpay by whatever you can afford ( upto £499.99 each month )

KarenBB

OH used to regularly overpay by £500 and each time he did he got a letter advising him of his new monthly payments, the letters did say if he wanted to reduce the term he needed to get in touch. As your monthly DD changes they have to write to you to tell you of the new amount, maybe you didn't notice it on the letters or like me you don't look at every detail on your bank statement (I know I should). It's not Nationwide's fault if you've only noticed now when your payments have been changing for the last 6 months so I don't think you've got a valid complaint. Everytime you overpay your balance reduces and you get charged interest on a lower balance so you have benefitted from overpaying.

As others have said call nationwide and they can reduce the term to take in consideration the overpayments that you've made, you can also get your account set so that whenever you overpay by £500 or more they always reduce the term not the payments.

Sidetracking slightly here , about a year ago OH did reduce the term on his mortgage but kept it at an amount where can still comfortably overpay by £499 each month. (499 as nationwide don't adjust the term or the repayments if it's less than £500 until there's a rate change) knowing that he can increase the term again if he needs to without any charge. We received a letter today saying that Nationwide are introducing new charges from September, one of them being that they'll charge £20 if you want to amend the term so we're going to get the term increased as we're out of penalty period soon and then still overpay so the mortgage is paid of quickly but have the option of borrowing back the overpayments if we need to over a long term if we need to. Really just keeping our options open.

brummierebel

I concur with KarenBB - Nationwide automatically assume you want a reduced payment and you have to contact them to reduce the term. You do have a choice, you just need to exercise it.

However, I wanted to pick up on the second point Karen made which was to do with the new charge Nationwide are introducing if there is an "amendment to the mortgage term". Does this terms which are automatically adjusted by overpayments or just when the mortgage is renegotiated with Nationwide. It seems rather unfair if there is a charge every time an overpayment is made which reduces the term.

brummierebel

Just in case anyone was interested, it appears the charge for changing the term does not apply to overpayments and is being discussed in the mortgage-free forum under "Nationwide Changes again" (cannot provide link as new user :think:)

KarenBB

H1 brummierebel, My understanding is that if you overpay and you've got your account set so that the term automatically reduces or if you overpay and get the reduced payment letter and then call n'wide to say you want your term reducing so your payment stay the same you don't pay the charge. I think you only pay the charge if you want the term extending or if you want the term reducing at another time - with both of these you have to fill in a 'changing your term...' form and this is when you would pay the fee. We reduced term a while back using this form and we'll extend it again before 1st September before the fee is introduced. We're going to do this so that if we need (really hope we don't) to borrowback the money we've overpaid we don't have to pay to extend the term then to keep the payments manageable.

AbbieCadabra

we're with A&L & we've been overpaying for just over a year now, I'm positive we were never given the option of reducing the term & our payments have decreased by £100 now. fortunately, i would have chosen this route anyway as our jobs aren't too secure at the moment & reducing the term might prove a bad move. it still would have been nice to have been given a choice though!

Yorkie1

Minor hijack I'm afraid but I feel particularly dense this morning. Can I just clarify if I've understood the distinction between the two options correctly?

If I make overpayments it reduces the capital owed to NW.

The 'reduced monthly payments' option means that NW spread the reduced capital (and interest) over the remaining original term, so you end the mortgage at the original planned time.

The 'reduced term' option means that NW keep my monthly payments at the same rate (as what?) but it takes less time to pay off the mortgage.

I assume that because I'm on a fixed rate with Nw then the reduced term option would apply to me, or would I have to opt for it anyway? And could someone briefly outline the best way to start doing overpayments? (I only moved 2months ago and this is my first mortgage)

MrsManda

Morning

Yorkie1 wrote: »

If I make overpayments it reduces the capital owed to NW.

Yes.

Yorkie1 wrote: »

The 'reduced monthly payments' option means that NW spread the reduced capital (and interest) over the remaining original term, so you end the mortgage at the original planned time.

Yes. Your current payment is based on how much you need to pay each month in order to have a mortgage term of X. If you overpay then you need to pay less each month in order to have a mortgage term of X so your payments are reduced. The more you overpay the less you have to pay each remaining month of your mortgage to have paid off the mortgage during the X term.

Yorkie1 wrote: »

The 'reduced term' option means that NW keep my monthly payments at the same rate (as what?) but it takes less time to pay off the mortgage.

You continue paying the same amount per month as you would without the overpayment thus reducing the overall term of the mortgage.

Yorkie1 wrote: »

I assume that because I'm on a fixed rate with Nw then the reduced term option would apply to me, or would I have to opt for it anyway? And could someone briefly outline the best way to start doing overpayments? (I only moved 2months ago and this is my first mortgage)

No, you will have to opt for it - I have a fixed rate and our first overpayment led to me getting a letter saying they'd reduced my monthly payments. I called and arranged for them to reduce the term instead.

As for the best way it really depends on what you want to do. You can transfer your overpayment manually each month so that if you don't have the money or don't want to overpay its your choice though you have remember to do it if you want to. Or you can set up a DD to do it automatically on the first of each month or whenever during that month. We do it manually so we have the choice and generally transfer the money as soon as we can so the first of each month.

Just make you don't go over the maximum overpayment for the month (£500 usually with NW but check your T&Cs) otherwise you will incur charges.
HTH

Yorkie1

That is really helpful, thanks Mrs Manda