Using overdraft to overpay mortgage

bridiej

With Nationwide you can overpay up to £500 a month with no fee.

MarkyMarkD

Jay

Thanks for coming back. The point I was trying to make (but clearly still haven't got across) is that you say that you are keen to be able to make overpayments, but do you REALLY need to be able to make overpayments?

As you are a basic rate taxpayer, you can earn 4.4% NET on any amounts you might wish to overpay. That's hardly any different to the 4.85% you'd pay Lambeth under this deal. So is it SO imperative that you can overpay, if you have some extra unexpected funds?

Of course, if you KNOW that you will have lots of funds (compared to the size of your mortgage) to offset during that three year period, fair enough. But for people to take offset products just "in case" they have funds (e.g. from stoozing) to offset is fairly irrational - it's agreeing to a definite additional cost in exchange for a speculative gain.

If your current "savings are large enough to make offsetting worth", how about just borrowing less, on a best buy mortgage - instant offsetting, with no cost penalty. The only benefit of offsetting, against that, is if you envisage needing the funds urgently. If you think you MIGHT need them, but not urgently, you could always take a further advance if and when the time of need comes.

JayS_3

Thanks Marky

Your main point about taking a smaller mortgage is what we intend to do when the funds become available (some before the end of the tax year, then the next and so on), hense the need to overpay large amounts (more than £500).

The reason we do not want to throw all our savings in is we may need them in an emergency, we learnt that last year when my husband was made redundant for the third time. As you know the Job Centre is not very supportive of anyone with assets, we had to live off our savings for several months until he gained a new job (started Jan, going well, we think). I don't earn enough to pay our mortgage and bills so we want a 'fall back', and unfortunately, banks/building societies don't extend mortgages/loans to those who are unemployed.

I know off-sets don't work for everyone, but they do for some.

Jay

DiggingOut

Sometimes the extra flexibility of an offset makes it worth it even if the cold, hard numbers don't quite work out.

The people who are most likely to benefit are the ones who have to run a lot of money through their current account, can't put it in savings because they need it fairly quickly, and aren't getting much of a return on their current account. Some self-employed people are in this category. If your average current account balance is £15-20K and you are getting 2% net on it, that goes a long way towards making the offset attractive.

payless

On the assumption that the OP is talking about a Nationwide 5 yr fixed
remember if having overpaid you find yourself a bit short - Nationwide allow you to draw back down any overpayments
( although likely at base rate , which is currently 5.99% - higher than the fixed mentioned , but less than the overdraft)

DiggingOut

Pretty sure you can borrow back overpayments at the rate that applies to the rest of your mortgage. Additional borrowing would be at 5.99%.

cloud_dog

DiggingOut wrote:

Pretty sure you can borrow back overpayments at the rate that applies to the rest of your mortgage. Additional borrowing would be at 5.99%.

This was my understanding when I replied (have a Nationwide BRT Mortgage)

cloud_dog

payless

sorry cloud_dog I missed your post saying the same thing-

although suppose no harm in me highlighting reborrowing overpayments are also available on those with fixed rates as well

cloud_dog

payless wrote:

sorry cloud_dog I missed your post saying the same thing-

although suppose no harm in me highlighting reborrowing overpayments are also available on those with fixed rates as well

No need to apologise, I was just re-affirming diggingout's post.