Northern Rock Together Mortgage - the saga is nearly over!

kate6000

Hi,
As posted previously my other half took at out a togther mortgage then about 2 years ago he sold the house and transfered the loan part to an unsecured loan on the same terms as the mortgage.

This was over 25 years so in the long term he would have been paying back around £75k for a £25k loan, shocking!

He's now saved up £10k and got a loan from RBS for £15k so he can pay the NR loan off

He has phoned them and they have asked him to write to them saying he wants to pay it off.

Does anyone have a nice template that we could use for this that ensures its paid off without paying more than is needed or incurring stupid charges.

As he's been paying off about £300 a month for 2 years I don't think he should be paying £25k, more around £19k but I have the feeling NR won't agree

Any help would be much appreciated

Kate

nomoneytoday

They will work out how much interest has been paid off, plus any penalties and give you a settlement figure.
It won't be £19000. Sorry.

Assuming 25 year repayment and 5% interest, with payment of £150 a month, I would make it in the region of £23500 left to pay.

skinnybowler

Unfortunately, because he sold the house and paid off the secured loan, Northern Rock would likely have increased the interest rate on the unsecured loan to SVR+8%. Therefore, the interest payable will be about £267 a month. After a 2 years, your balance will probably still be about £24700!!

What have you been doing with the savings? There are no overpayment restrictions on the NR Together unsecured loan, so these could (and should) be paid into there as there is no possibility of getting a greater return than the interest rate.

If I was in your situation, the first thing I would do is phone Northern Rock and pay them the balance of the savings now. If this is £10000, it will reduce the interest payable on the loan to about £145 pm.

Is the RBS loan at a rate lower than 12.79%. If not, DON'T DO IT!! There is no benefit in having a loan with a shorter term because there is no penalty for making overpayments to NR.

If you pay £10000 now, then (unless the Northern Rock SVR increases) you will pay off the loan to Northern Rock in 64 months. However, if you have saved £10000 in 2 years, then you could probably afford to pay more per month. If you could afford £650 a month, it will be paid of in 2 years.

Fiddlestick

kate6000 wrote: »

This was over 25 years so in the long term he would have been paying back around £75k for a £25k loan, shocking!

Why do you think it's shocking?

If the £25,000 is borrowed over 25 years then with compound interest it is perfectly possible to pay such an amount back, depending on the APR.

kate6000

Hi,
Thanks for all your thoughts, its great to get other peoples perspective.

The money has only been saved in the last 2 months due to bonuses received from his job finally being paid so he's not really been sat on it that long

The interest rate is 9% on the RBS loan so worth going for

I find this shocking as he has tried to shorten the term by increasing the payments but they would not allow this, even though he could afford to double the payments. I realise he signed up to the terms and conditions but I don't think he really thought through the consequences at the time, lets just say we've had some maths lessons at home since he did this to make sure he doesn't again.

One final thing, does anyone what he should say in the letter to make sure everythings covered

Thanks
Kate

skinnybowler

kate6000 wrote: »

Hi,

I find this shocking as he has tried to shorten the term by increasing the payments but they would not allow this, even though he could afford to double the payments.

This is the bit that confuses me. If this was a Northern Rock Together Mortgage, then the unsecured element is completely flexible - i.e. you can make as many overpayments as you like and there is no Early Repayment Penalty.

On this basis, I suggest you call them, ask for the current balance and pay this amount today by phone (debit card). The only amount outstanding will be any interest yet to be applied. Then, if they still refuse to give you a settlement figure by phone, write to them asking for a settlement figure, and pay this final amount to close the account. There should be no penalty to close the Loan as there should be no ERC.

I would also complain to them on the basis of the extra interest you have been forced to pay due to being wrongly advised that you were unable to overpay. Ask for this interest back, threaten to take to the FOS, etc.