Natwest Confusing Me How Overpayments Will Affect My Mortgage

mark_curd

Hi All,

I posted about 2 weeks ago with regards to making my first lump sum overpayment to our Natwest mortgage account. I'm still having difficulty understanding what the admin staff are trying to tell me.

I will start off with giving some details of the mortgage.

Original Principle: £121,000
Interest Rate: 5.99%
Term: 5yr Fix from Oct 2009
Overpayments Allowed: 10% of outstanding capital each year.

So I phoned up and said I would like to make an overpayment and want it to adjust the term. First off I was told its not possible and that any overpayments I made would only adjust the monthly DD, after a long talk and still going round in circles that there was no chance of the term being reduced I began to ask how the overpayment would adjust the mortgage. I was told by making extra monthly payments or one off payments it would offset the original monthly DD, I asked if it adjusts the monthly DD am I allowed to then setup and additional monthly DD to bring it back inline to what it was before and then just keep asking each time I made a payment to adjust this DD. They couldn't answer and at this point I was getting a bit annoyed and quite frankly I don't think the operator even had a clue. So I ended the call.

I tried again the next day, starting a fresh and asking the first question about making the overpayment and adjusting the term. This time the answer was yes, of course you can do this no problem. There will be a admin fee of £35 to adjust your mortgage contract and to send you out an updated term. Great! so I went and proceeded and they took the payment from my account and I am now just waiting to get the updated papers. I then asked about monthly overpayments and was told if I wanted it to adjust the term I would need to pay £35 each time!!!! otherwise it would just adjust the monthly DD. I still don't get why if I'm able to make overpayments would I want to reduce my monthly DD if anything I want to increase it.

I have since phoned a few more time but still find the information given varied amongst staff. Can anyone shed a little light as to how your mortgage provider handles your overpayments. If the overpayments do indeed adjust the DD what is the best way to make sure that the overpayment are reducing the capital.

Sorry for the long winded post. Look forward to any advice.

Thanks

Mark

katsu

If you have to reduce the payments, then save the difference between the new and original payments towards your next OP, to avoid "wasting" the benefit of the OP. Just keep doing that and you will pay your mortgage off quicker.

Read your mortgage paperwork to see how they handle OPs. Our broker was very helpful with advising on mine.

We are with santanduur and I can either reduce the payments or the term, but I must OP a min of £500 a time. What I decided to do was to ring up and check the current amount I am paying off the capital per month and then overpay multiples of that amount (hence the funny OP amount in my sig).

[Deleted User]

I make overpayments to Nationwide and remember this being a slight issue. The first overpayment we made immediately dropped the value of the next month DD. So asked them to keep the DD the same, which they did from then on. But overpayments cannot be more than £500.

The official term of our mortgage is still the same, but the capital is reducing, so the mortgage will effectively come to an end before the official term.

I don't recall needing to do anything other than tell them that I wanted the DD to stay the same (can't remember if that was on the phone or in writing), but that was about 3 years ago.

mark_curd

Thanks for your replys so far.

The way OP are handled within our agreement is we are allowed to OP each year 10% of the outstanding balance. Exactly how they work it out if you are regualary OP is something I have yet to look more into detail. Apart from that, from what info I can get from the customer advisor is any payments lower than £100 will not affect the month DD and anything over they will adjust it. If I want them to adjust the term I have to pay the admin fee of £35.

I think I will try an OP soon of less than £100 to see how they amended it and I will do another next month over £100.

If anyone is with Natwest and can comment how yours is handled that would be great.

Thrugelmir

mark_curd wrote: »

If I want them to adjust the term I have to pay the admin fee of £35.

That's because its a contractual change to the mortgage. Requiring paperwork and processing.

Far easier just to leave the original term in place.

The computer system will be set to detect capital repayments exceeding 10% of the previous years capital balance outstanding.

So take care. As the penalties for exceeding may wipe away some of the benefit you have accrued during the year.

mark_curd

Thrugelmir wrote: »

That's because its a contractual change to the mortgage. Requiring paperwork and processing.

Far easier just to leave the original term in place.

The computer system will be set to detect capital repayments exceeding 10% of the previous years capital balance outstanding.

So take care. As the penalties for exceeding may wipe away some of the benefit you have accrued during the year.

The £35 for the charges are understandable but the lack of correct information is not very helpful.

Any benifical reason to leave the term in place and adjust the monthy payment? how does it work when you get to say owing only a few thousand and have for example 15 years left? I guess you would just pay off the outstanding and end the mortgage? I also see that some say to keep paying a small amount so they keep the deeds, whats the reason for this?

Thanks

Thrugelmir

mark_curd wrote: »

how does it work when you get to say owing only a few thousand and have for example 15 years left?

Your monthly payments would be adjusted accordingly.

A degree of flexibility may be useful in years to come. As it may not be possible to maintain overpayments indefinately.