Overpaying a Nat West mortgage

Reclining_Otter

Hello all,

This has been puzzling me for some time. For the first time in my life I have been earning enough money this year to overpay my mortgage. Strike whilst the iron's hot I say. I have a fixed rate NatWest mortgage wilth a limit of 10% for overpayments. I'm told that there will be a fee of 3% for going over this limit with overpayments in a year but I'm finding the caluculations rather confusing.

First question:
To work out the 10% amount I simply use the starting balance at the beginning of the mortgage year. Simple enough. However, when I make an overpayment, they reduce my monthly payments so does this affect the original 10% amount I am allowed to overpay? - In other words am I risking going over the 10% thereshold if pay the 10% overrpayment and ask them to keep the monthly payments at their original level?

Second question
If I go over the 10% figure with overpayments I will be charged a 3% fee. Is this 3% of the total outstanding mortgage balance (that'd make the fee approx £2400), the total amount paid back that year (£400ish), or just 3% of the amount I've gone over the limit (£150 or thereabouts).

My mortgage documentation doesn't go into more than 2 lines of detail on overpayments and when I've spoken to their mortgage team on the phone they've managed to confise me further. Perhaps I'm confusing them...

Anyway, I'd appreciate your opinions.

Thanks

R.O.

dimbo61

Yes its 10% of the outstanding balance on the 31st -12-2010 and they will reduce your mortgage payment unless you ask them in writing to keep the mortgage payment static! and hence reduce the term. I see what you mean about paying more than 10% if you paid off the 10% in janurary and keep your mortgage payment static but see what they do!!!
The 3% fee is whatever you overpay above the 10% limit so if you pay an extra £1000 then they will charge you £30 but that maybe some way off and once you have paid off the 10% allowed look at cash ISA,s and regular savers.

Reclining_Otter

Thanks. That's what I'd hoped was the case really. I'm probably going to go over the 10% amount by £3000 - £5000 so a 3% charge will be more than recouped by the savings in interest payments next year.

It's silly really, surely most people make over-payments so they can repay their mortgage early, and all the lender does is adjust the monthly payments to keep the term the same (and therefore milk as much interest out of you as possible in the long term).

dimbo61

Its not silly they are losing money by not getting as much interest over a longer term as you pay off the mortgage early.
Now have you checked out reducing the term !
I paid £50 to my lender to reduce my term from 22 years down to 10 years

Engeroosi

Rather than pay the ERC of 3% put the money in an ISA until the next mortgage year, then repeat until fix rate ends and then use all the money you have spare to reduce balance for your next mortgage.