Overpayment nationwide

Joe_Bloggs

@moneysavingaddict07
I rescheduled my mortgage payment day to be two days after when I get paid. This way the mortgage payment is not left sitting around in a flex account earning little interest. Previously the mortgage was on the first and I had to lose interest on it for up to ten days until they took the money.

I chose to have overpayments reduce the term and used to always overpay by £500.I now pay £499.99 to avoid the pointless letter from Nationwide. In early years I overpaid when I had the money and could be sure that I wasn't going to need it. There is no penalty for overpaying what you can throughout the month.

A £500 overpayment 0n a 5% mortgage is going to save almost 7p per day. The same overpayment at BMR (2.5%) is close to 3.5p a day. By delaying the overpayment you lose this amount. However if the money is in an interest bearing account then you lose /gain the difference in the net rates. It is not a great amount and not worth risking bank charges/financial stress by overpaying money too soon.

J_B.

uzubairu

We are remortgaging elsewhere at the moment and I phoned the Nationwide today to get a redemption figure.

The redemption figure is based on the outstanding loan amount, so the extra overpayments have helped to save us interest whilst we have the mortgage and pay a lower ERC at redemption.
Our ERC started at 5% in 2006 reducing by 0.5% each year over the 10 year fix.

ERC on 31st December (from Annual Statement)
2006 = £5,301 (Overpayment Reserve = £0)
2007 = £4,480 (Overpayment Reserve = £3,663)
2008 = £3,643 (Overpayment Reserve = £8,914)
2009 = £2,648 (Overpayment Reserve = 17,968)

ERC on 13th July 2010 = £2,105 (Overpayment Reserve = £24,048)

There is no indication that the £6,000 of overpayments since January 2010 has affected the ERC.
We surely can't be the only ones, but if we are, we're not complaining.


The first time we paid more than £500 (late 2008 - whilst changing accounts I forgot to cancel old standing orders), we didn't receive a charge, even though I phoned them up in a panic and asked if any charges would be applied.
The assistant told me we could either leave the money where it was or have it returned to us.
She also said that charges are applied automatically and she couldn't see any on the account.

I then checked the MSE forums and found this thread:-
http://forums.moneysavingexpert.com/...ay#post5814043

After reading Post #10 we increased the overpayments and haven't had a worry since.

moneysavingaddict07

I've just had a look at your link, and still unsure how it means you can get away with paying over £500/month.

Most lenders in practice have a minimum amount below which they don't bother to charge - with Nationwide, for example, it's £500 per month. That's simply because a 3% ERC on a £400 overpayment is only £12 and it's not really worth the hassle of collecting it, as well as because it makes the products look more attractive to the potential customer.

Which i thought is still true in 2010.

Also MarkymarkD - an alternative way of avoiding paying the ERC,

In other words, rather than overpaying £100 a month on your £100k mortgage which has a 2 year ERC, save up the £2,400 in a savings account (even better if it's an ISA as it's tax free interest) and then when you remortgage, just borrow £97,600 rather than £100k and pay the £2,400 to your solicitor to net off the mortgage. (Example assumes interest only to make the numbers easy, but you catch my drift I hope).

How much would this cost to involve a solicitor?

uzubairu

My interpretation (it may be wrong) was that if you went over the overpayment limit by up to £500 (ie you make a payment of up to £1,000), they didn't bother with the ERCs.
In January, March and April this year, I paid in £1,000.
The fact remains that in 2 years and 7 months, I have officially added £20,300 to the Overpayment Reserve and not paid a penny in ERCs.

moneysavingaddict07

uzubairu wrote: »

My interpretation (it may be wrong) was that if you went over the overpayment limit by up to £500 (ie you make a payment of up to £1,000), they didn't bother with the ERCs.
In January, March and April this year, I paid in £1,000.
The fact remains that in 2 years and 7 months, I have officially added £20,300 to the Overpayment Reserve and not paid a penny in ERCs.

Ah ok, thanks. it looks like you're ok if they havent charged you anything.
I'll be looking for a five year fix after my mortgage offer enters the SVR. So i guess it's better for me to ask them to recalculate the monthly payment rather than shorten my term?

Thrugelmir

I've just had a look at your link, and still unsure how it means you can get away with paying over £500/month.

Probably as lenders are quite happy for their customers to overpay in the current times. Lloyds is currently allowing unlimited repayments and removed any restrictions.

Lenders do have major funding issues looming on the horizon. So reducing the size of their loan books is their objective. Far outweighs any loss of interest they would have earnt on the additional debt.

Radionotme

How do you know you've not paid ERC's by the way? Is it possible that they've been taken from the overpayment before reducing your principle?

I've always stuck to the £500 limit, or rather the £499.99 limit as this allows you to effectively overpay by more than £500 as the interest rate isn't recalculated and your regular interst payment becomes partly overpayment too.

I accidentally overpaid last month by paying in a second £499 on the 30th June, expecting it to come in on 1st or 2nd July, but rather than potentially have ERC's I asked them to move it to a July payment, which they were happy to do - am I to believe that if I'd have left the £999.98 overpayment for June in place there wouldn't have been any negative repercussions?

uzubairu

Radionotme wrote: »

How do you know you've not paid ERC's by the way? Is it possible that they've been taken from the overpayment before reducing your principle?

I've always stuck to the £500 limit, or rather the £499.99 limit as this allows you to effectively overpay by more than £500 as the interest rate isn't recalculated and your regular interst payment becomes partly overpayment too.

I accidentally overpaid last month by paying in a second £499 on the 30th June, expecting it to come in on 1st or 2nd July, but rather than potentially have ERC's I asked them to move it to a July payment, which they were happy to do - am I to believe that if I'd have left the £999.98 overpayment for June in place there wouldn't have been any negative repercussions?

I think Thrugelmir could be right.

It happened to me a few years ago (paid £700 in error), and I was told that I could leave the extra money (£200) in as an overpayment for that month or have it returned to me.
No charges were applied.

I don't think they would be allowed to disguise an ERC as a reduction in our overpayments or increased interest amounts. It would have to be declared online or paper statement as a charge and detail the circumstances for it being applied.
I have never received any such notification.

I have a detailed spreadsheet that tracks our payments and the mortgage balance matches it 100%.
If there were charges, the real balance would be higher than our calculated one.

The Overpayment Reserve matches our deposits 100% too and the last 4 annual statements reflect this too.
The ERC on the annual statements every year (without considering additional charges for exceeding overpayment limits) has matched our spreadsheet calculations 100%.

Currently, we've made overpayments of £800 this month (over £6,000 YTD) and no charges have been applied.

KarenBB

I overpaid too much one month and received a letter stating an ERC, the charge could be seen on my online banking as a charge. As previous posters I asked them to transfer that to the next month which they did and the charge was cancelled. If you verpay by more than £500 that is the trigger amount for change of term/ payments. Maybe there's a trigger amount for an ERC ie if it's only going to be a chrgae of £1.50 they don't charge one, if it's £21.50 they do.

uzubairu

KarenBB wrote: »

I overpaid too much one month and received a letter stating an ERC, the charge could be seen on my online banking as a charge. As previous posters I asked them to transfer that to the next month which they did and the charge was cancelled. If you verpay by more than £500 that is the trigger amount for change of term/ payments. Maybe there's a trigger amount for an ERC ie if it's only going to be a chrgae of £1.50 they don't charge one, if it's £21.50 they do.

That's my understanding as to why I haven't been charged in nearly 2 years of monthly overpayments of £500+.
I've kept my overpayments to £1,000 max and I think that has kept me under the radar.