Thank You Forum

Mushy61

Hello everybody.

I came across this site recently and have been inspired by some of your experiences, particularly the threads regarding paying off your mortgage early.
Until recently, paying off my mortgage early never really crossed my mind and I was more intent on building up my savings.

However, using the overpayment calculators on this site and seeing how much interest I could save by overpaying £100 a month had me kicking myself for not doing it earlier.

I decided to contact my lender (Nationwide B.S) and set up a £100 overpayment into my mortgage account each month. One small setback however is that I am currently on a part repayment/part interest only mortgage (£16,800 total mortgage, £10,000 of which is interest only which will be met by an endowment policy in 2013). I was informed by the girl on the phone that I could pay in regular overpayments but couldn't actually reduce the timespan of the mortgage as it is tied in with the interest only part and therefore it looks like I will still be committed to paying my mortgage (however small until 2013) unless there is a way around this.

Any help or advise would be most welcome.

Thanks.

David_B_2

Mushy61 wrote:

Hello everybody.

I came across this site recently and have been inspired by some of your experiences, particularly the threads regarding paying off your mortgage early.
Until recently, paying off my mortgage early never really crossed my mind and I was more intent on building up my savings.

However, using the overpayment calculators on this site and seeing how much interest I could save by overpaying £100 a month had me kicking myself for not doing it earlier.

Welcome aboard, we've all been there!

Better late than never I say and I'm glad I found this site now and not a few more years doen the line.

mrs_deadline

We are with Nationwide and we can overpay up to £500 per month on our deal. The payments aren't actually deducted but they sit in an "overpayment reserve" and effectively reduce the amount we pay interest on.

I wonder whether, if you cleared the repayment part early, you could keep building up the overpayment reserve until you were fully offset? At that point you would only have to fund the endowment. Does that make sense?

mleonard79

Hi Mushy61,

I'm not entirely sure how Nationwide's mortgages work but if you have an eary repayment charge then just be careful not to pay either parts of the mortgage down to nothing. If there is no early repayment charge or if the time period for it will pass within the next few years then I can't see any reason why you can't pay off the repayment part of the mortgage through overpaying and then once this has been achieved overpay into the endowment part which would leave you with cash left over from your endowment policy when it matures.

Regards

Michelle

Mushy61

Hi michelle,david and mrs.d,

Thanks for the welcome,

I've arranged for a meeting with the Nationwide next Tuesday and hopefully get it sorted then.

mleonard79

Good luck with that Mushy61! :beer:

financialbliss

Hi,

I'm with Nationwide too. If you're on their their base rate mortgage (BMR) there's no limit on the amount you can repay - however, I'm only allowed to pay a maximum of 500 per calendar month, as I'm on a fixed rate product.

When making an overpayment, you get the option to either reduce your normal monthly payment, or to reduce the term.

As already mentioned, you may be able to pay off the repayment element first, by directing your overpayment to that part of the mortgage.

I initially reduced my monthly payment, but earlier this year, I swapped to reducing the mortgage term - fixing the monthly payment.

Hope you get things sorted - in my experience I've found Nationwide pretty helpful with mortgage queries.

Mushy61

Thanks for that, financialbliss.

The lady I spoke to at the Nationwide call centre gave me the impression that I could only reduce the monthly payments by overpaying into the account, however, as I am meeting a mortgage adviser this week I will try and see if I can reduce the actual mortgage term as that would be the ideal scenario for myself.

jamesd

What is your interest rate? Is it variable or fixed? Can you direct payments to the interest only portion to pay that off early?

If their mortgage advisor suggests any form of mortgage switch to a different product that involves any costs, remember that you should shop around because there may be a better deal than the one offered by Nationwide.

When choosing between overpaying or saving remember that you can get 5.75% tax free from the Ruffler Bank ISA and 12% through 8% taxable from regular saver accounts for up to 250 a month per account. These options usually make more in interest than you save by paying off the mortgage.

One flaw with the overpayment calculators here is that they don't usually show you what you could save if you saved then paid off the mortgage once your savings exceed the value of the mortgage. That can give the false impression that paying off the mortgage leaves you better off than saving, which is usually wrong for people with competitive mortgage deals.

The only reason for kicking yourself for saving would be if you weren't getting the best savings rates available or if your mortgage is more expensive than usual so it's more costly than the best savings rates.

Mushy61

Thanks James, some really useful info there.

When I switched my mortgage in 2000 to the Nationwide, I took out their 2 year fixed option at 4.75% I think it was at the time. Since then, my mortgage rate has altered accordingly with the interest rate changes and am currently paying 6.24% :eek:, this is one of the reasons I am meeting with the Nationwide tomorrow to possibly seek an alternative product.

The ISA I have is with the Bradford & Bingley which pays 5.2%, so at this present moment overpaying into my mortgage account would seem the best way forward.

I realise my mortgage interest rate is very high compared with most on here and I admit I have been a bit lax with getting the best deals until I came upon this site.

Would it really be worthwhile changing lenders at this stage though, considering my outstanding balance is relatively small and fully intend getting stuck into it with regular overpayments?

jamesd

At 6.24% you definitely need a better mortgage deal!

16800 total mortgage is a little low but there's still quite a bit of choice available and something like a lifetime (term of mortgage) tracker is likely to be a good option, since that will never see a rate rise to the standard variable rate (SVR). What's the total value of the property? Any reason why you wouldn't qualify for a normal mortgage deal (like missed payments, CCJs or something else that damages credit)?

Best to see what Nationwide offers but don't actually sign up for anything, then look for a whole of market fees-free broker and see if they can find you a better deal.

It looks as though Nationwide does offer a competitive deal for you: 16800 pound lifetime tracker at BoE+0.18% (4.93%) with a 399 reservation fee or lifetime tracker at BoE+0.58% (5.33%) with no reservation fee. A very rough calculation suggests that you're not going to be keeping the mortgage long enough at high enough amount owed to make paying the fee worthwhile. 500 a month overpayment without penalty. This looks like a very competitive lifetime tracker deal - possibly the best available for your mortgage amount, likely very close to it. This should get rid of the limit to 2013, though it's not a bad idea to use that as the declared end date to get you some payment flexibility, particularly if you choose to make it all a repayment mortgage, which locks in a fair bit of overpayment anyway compared to what you have been doing. Would cost about 75 a month if it was all interest only, about 240 if it was all repayment, about 142 with the same mix as you have now. All calculated for a 7 year term.

At 5.33% for the mortgage the save option looks best to me - but if you just want the mortgage gone, well, that's fair enough.

If you have 3000 in that Bradford and Bingley ISA (including any money in any ISA from past years) you can just ask Ruffler Bank for an ISA transfer form and move the money over. If not, you can just contribute until you have 3,000, then transfer.