Overpayments on mortgage

messydesk73

Hi, complete newbie here but I've been reading some of the threads on making overpayments on your mortgage.

We've got £56.5K remaining on just under 14 years. Currently paying 2.5% with Nationwide. Was thinking about jumping onto a fixed rate deal in case rates start to rise but now we've decided to go the overpayment route for a while and see what happens with the rates this year.

So.... my question is: if we make a lump overpayment (ie the total we've 'saved' since we dropped onto the 2.5% rate 18 months ago) should we get them to drop our monthly payments or reduce the mortgage term? Thing is in my eagerness I went in there today with my cheque and said I didn't want to reduce our payments, but to shortened the term - now I think that was perhaps not the best choice?! :huh:

And what about future monthly overpayments we're hoping to make, say £100-£200?

Thanks in advance for any advice/comments

globalds

I haven't changed my term as I felt however long left I will pay it off early if I keep overpaying.

I never put a lump sum down and as my mortgage is with my bank ( HSBC) I just overpay on-line and instantly see the overall debt drop by a couple of hundred each time.
The odd thing is the interest I pay on the debt doesn't change even after I have made quite large overpayments....Maybe it is calculated yearly.

It is a great feeling overpaying. In hindsight I could probably have made a little more if I had stuck the overpayments in a high interest account for the last 3 years ...I have a suspicion I would not have quite as much in that account as I have paid off ,due to me finding other things to spend on though.

whatyadoinsucka

globalds wrote: »

I haven't changed my term as I felt however long left I will pay it off early if I keep overpaying.

I never put a lump sum down and as my mortgage is with my bank ( HSBC) I just overpay on-line and instantly see the overall debt drop by a couple of hundred each time.
The odd thing is the interest I pay on the debt doesn't change even after I have made quite large overpayments....Maybe it is calculated yearly.

It is a great feeling overpaying. In hindsight I could probably have made a little more if I had stuck the overpayments in a high interest account for the last 3 years ...I have a suspicion I would not have quite as much in that account as I have paid off ,due to me finding other things to spend on though.

i got a tracker HSBC at 2% +BR and interest will reduce ever so slightly overtime, hsbc calculate interest on a daily basis, we lump summed 10% last year and it does make a noticeable difference, albeit the interest element is now 10% lower, thats why i overpay, cash sat in a bnak to me is wastefull, so i'd end up buying needless crap i don't need, let alone want a few months later

messydesk73

Thanks for the replies I think I might phone them on Monday and ask if they can ignore me today and set it so the term stays the same. I guess we just add any reduction in the monthly payments onto our overpayment amount and so in theory we are actually overpaying more each time.

Oh and was told I can't set up a SO or do an online payment into our mortgage account which is a pain as means I need to go into the branch each month.....

getmore4less

With a mortgage rate of 2.5% it should be possible to find a net saving rate higher than this.

The advantage of reducing payments(when there are no overpayment charges) is that you can drop the payment if you want later.


There will be a way to overpay without going in, have search I am sure there have been a few threads on this

messydesk73

Thanks for the advice, will look into savings accounts too I thought there should be a way to overpay without visiting the branch - they said it has to be done at the counter as you have to specify if you want to reduce your monthly payments or the terms when you make each overpayment. Will look into that too.

EvonneW

I have a Nationwide mortgage and overpay but I just do it online as a payment from my current account. I have also in the past set up standing orders to overpay the mortgage. If you have internet banking, you should also be able to do this. You can also sign up for internet banking with Nationwide. This will allow you to see your mortgage balance and check that payments go through (the amount paid in that month will go up by the amount you've overpaid). If you set up payments form your current account, I would suggest you make the first payment a small one (I did £1), to confirm that the details are correct before committing larger amounts to the ether. Payments usually take 2 working days to show up in the mortgage account, although it does occasionally take longer.

You can also then set whether you want overpayments to reduce the term or the amount paid. I think this takes a day or so to take effect. With mine, overpayments of under £500pcm roll up into an overpayment reserve.

HTH

KarenBB

messydesk73 wrote: »

Thanks for the advice, will look into savings accounts too I thought there should be a way to overpay without visiting the branch - they said it has to be done at the counter as you have to specify if you want to reduce your monthly payments or the terms when you make each overpayment. Will look into that too.

This is from the Nationwide website after searching overpay mortgage -
To make payments into your mortgage directly from a bank account, you will need to quote the following details:

Sort code: 070094
Account number: 44444445
Reference number: Your mortgage account number

I regularly make online payments. If you want the term reducing each time you can ask them on the phone to set it so the preferred action is to reduce the term rather than the payment. There's a messaging option online as well but replies take about 5 days.

The downside of having the term reduced is that if you want to borrowback the money you've overpaid the payments are calculated on the new term so could be much higher, you can increase the term again when you borrow the money back but changing the term then costs you £20, the only time they don't charge is when you change the term as a result of the overpayment. 1st of the month tomorrow so I must remember to make a payment, I like to do it as early in the month as I can remember to cut the interest asap.

Burridge60

Just pay it off. rates are going to go up eventually and you are talking a few quid here or there.