Understanding mortgage over payments

B'stard

Last year, Feb 2010, I took out a £40,000 mortgage - 5yr fixed at 5.38% over 7yr term.

Currently I'm managing to overpay each month by £500 (the max amount Nationwide allows me) I have chosen to bring down the term of the mortgage rather than decreasing the monthly amount.

If I carry on overpaying by this amount when will the mortgage be paid off?

If I finish the mortgage before the 5yr fix will I be penalised - is it better to change from reducing the term to reducing the payments?

According to Nationwide I owe £27,000 and an agreed redemption date of October 2015.

silvercar

Mortgage calculator here:

http://www.whatmortgage.co.uk/mortgage-calculator-what-if-i-over-pay-my-mortgage/

Looks like the mortgage will be cleared in 3.4 years. If the lender is allowing these overpayments without penalty you will have finished the mortgage before the fixed rate end.

B'stard

Thanks for the reply.

Will there be a penalty for finishing early?

TrickyDicky101

I can't see why you would be penalised as you will have abided by the terms of your mortgage. You will bring forward the date when you need to pay the £90 admin fee for paying off your mortgage but that's small beer

dwsjarcmcd

TrickyDicky101 wrote: »

I can't see why you would be penalised as you will have abided by the terms of your mortgage. You will bring forward the date when you need to pay the £90 admin fee for paying off your mortgage but that's small beer

Not sure about that. If you used a capital sum to repay the loan you would be charged an ERC, so why not if you overpay? It will depend on the T & C's as you say but one of these could be that these charges could be based on the original balance.

I suggest the OP asks the Nationwide who will give the definitive answer.

themull1

You will pay a penalty for clearing your mortgage early as you are on a fixed term, it tells you the penalty for paying it off early when you get the info on your mortgage through.

TrickyDicky101

Then don't pay all your mortgage off - leave a nominal balance on the account.

B'stard

Just checked a letter I received from Nationwide on May 2010.
It says...

Early Repayment Charge - this charge expires on 28th February 2015. If you repay the mortgage, transfer to another product or make an overpayment of more than £500 above the monthly payment in any calendar month, before the expiry date shown, you will be charged an Early Repayment Charge.

The amount payable will be 5% of the loan.

The latest letter from Nationwide regarding over payments states the remaining term as 4yrs 5months.

So, if I carry on overpaying by £500 each month and the remaining term keeps going down - what happens - what amount is the Early Repayment Charge?
Should I change from bringing the term down to bringing the monthly payments down?

Thrugelmir

B'stard wrote: »

The latest letter from Nationwide regarding over payments states the remaining term as 4yrs 5months.

What is the date of the letter?

You need to shorten your mortgage term to end on the 28th February 2015. Possibly you may need to make minimal repayments for a period of time towards the end of the term.

B'stard

Thrugelmir wrote: »

What is the date of the letter?

You need to shorten your mortgage term to end on the 28th February 2015. Possibly you may need to make minimal repayments for a period of time towards the end of the term.

3rd April 2011.

But using the over payment calculators I have only 2-3yrs left to pay. I can afford the over payments so can carry on paying them till the mortgage is finished. But how much will the Early Repayment Charge be?
When do I change from bringing the term down to paying the minimum each month?

silvercar

If overpayments of up to £500 are allowed without penalty then carry on making them. When the amount owing is less than £500 just stop making them. That way you will have a mortgage of less than £500 that can continue running until the ERC no longer applies.

Interest on £500 at 5.38% would be £2.24 a month. So you carry on paying this small amount each month until you are out of the fixed term.