Beware of a Catch with Overpayments on Nationwide Mortgages

jobbingmusician

alanobrien wrote:

No this is a new one on me.
My mortgage is a 5 year fixed rate. I started overpaying 100 quid a month then built it up and it has always reduced the duration of the mortgage.
How do i know this ? Well nationwide insist on sending me a letter every month telling me the mortgage completion date has changed (moved back

Sounds like its a new condition on recent mortgages ? If so its very sneaky

Just a thought - NW aren't charging you each month for sending out these letters, are they? It seems too good to be true that they would send out letters FOC, and we all know that banks and BS see corresponding with customers as a good way to make money......:o

alanobrien

jobbingmusician wrote:

Just a thought - NW aren't charging you each month for sending out these letters, are they? It seems too good to be true that they would send out letters FOC, and we all know that banks and BS see corresponding with customers as a good way to make money......:o

No, at least there have been no charges associated with either the mortgage account or my flexaccount as far as i can see. I suspect that someone is just being a bit over zealous.

Karmacat

I thought I had this straight, but now I'm confused....... I have a Nationwide two year variable interest only mortgage .... I've just started to repay (thanks to the Mortgage Pig!) and when I sat down with the mortgage advisor at my local branch, he worked out for me at my request, bless his cotton socks, that a single overpayment of £50 reduced the amount of interest chargeable each month by about 20 pence! Obviously, I don't expect the monthly payment to reduce by that amount, but I'm just about to make the third overpayment, and I'm starting to wonder... what happens to that gain from the overpayment? The overpayment is credited to my account, and the monthly payment will change next time there's an interest rate change, I get that now, but what about the monthly savings from having *made* the repayment? With the next one (which I was planning to do on Thursday) that will amount to about 60p per month. I know its nothing in itself - half a cup of tea at London Bridge - but with another two repayments it will be £1, and it will be going up from there. Can anyone enlighten me what happens to that money, when - or if, horrors - its credited to me?

macca64

It does not get credited back to you. They (Nationwide) just charge you less interest, as there is less capital outstanding to charge the interest on.

HTH

Gary_zero

Karmacat wrote:

when I sat down with the mortgage advisor at my local branch, he worked out for me at my request, bless his cotton socks, that a single overpayment of £50 reduced the amount of interest chargeable each month by about 20 pence!

Surely this cant be right? If you make a £50 overpayment now it will reduce your interest by 20p per month would mean it takes over 20 years to break even. Or am I missing something?

jamesd

You're missing that the 50 is off the capital, which means you break even immediately. The saving of interest is a different matter and if you want the saving of interest to match the amount paid you're asking for the time for 100% return on investment, not just breaking even. At 5% interest rate it takes about 15 years before you save in interest as much as you overpaid. That's ignoring inflation, which means it really takes 29 years if inflation is 2.5%.

Gary_zero

Thanks I see it now

moneysavingwannabe

Ok, it's been a long week so far and I'm really confused!!

We have a 5 year fixed rate and have been overpaying £200 a month. The mortgage is £411.04

The yearly statement says our agreed repayement date is 2029. We are hoping to pay it off within 10 years or so.

We have the small print about overpaying by £500.01 or more than the monthly repayment and a penalty.

Does this mean if we overpay by £411.04 (the mortgage payment) we would be penalised?? Can we overpay more than this??

I assumed if we kept overpaying and then changed mortgage when the fixed rate ended we wouldn't pay a penalty apart from the £90 admin fee? Would we have to pay the early repayment charge??

bootman

No you can pay £500 a month as an overpayment even if you regular payment is less. Just watch out you don't bring the amount of years left to pay down below your fixed period, When my fixed ended a couple of months ago I just switched for free to another fixed with no fees.

I increased the monthly payment to bring the term down further and intend on overpaying as usual. I just have to watch though as I took it down to 4 years left and on a 2 year fixed. So I have to make sure I don't end up clearing it quicker than my tied in period.

moneysavingwannabe

Thanks for that!!

Do you know why our repayment date has stayed the same?
Do we need to overpay £500 exactly to have it recalculated?

Thanks again.:D