overpayments advice please

jackomac

I have been overpaying my Nationwide mortgage by £100 per month. My current mortgage is for £60k, fixed for 5 years, ending April 2013, rate 5.63%. I have 17 years remaining on the overall term. My aim is to repay asap. Which option do I take to deal with the overpayment?
1. pay off mortgage earlier by reducing term
2. reduce future payments or
3. keep existing payments and term as is, at next natural payment change, your repayment will be automatically recalculated.
Thanks

dimbo61

I would keep it simple and overpay what ever you can afford each month until the fix ends!
Ask to keep your "normal mortgage payment static" and OP as much as you can.
Nationwide allow upto £500 a month ( I think so check with them )
Every £1 you OP is saving you 5.63% tax free and if you build up overpayments you can then have a " mortgage holiday " if needed

rs65

I chose to overpay but keep the original term. If you reduce the term then your compulsory payment increases. If you simply overpay, you could choose not to overpay if need be in any particular month

TrickyDicky101

rs65 wrote: »

If you reduce the term then your compulsory payment increases.

I think you mean it remains the same. The overpayment will reduce the term so that repayments remain the same *.


* it's possible that terms will be rounded up/down depending on the size of the overpayment but impact should be minimal.

DVardysShadow

TrickyDicky101 wrote: »

I think you mean it remains the same. The overpayment will reduce the term so that repayments remain the same

I think rs65 takes it as read that the payment decreases when you overpay, because the term remains the same. Hence if you reduce the term, the payment increase back to the same as it was before you overpaid

Trentenders

DVardysShadow wrote: »

I think rs65 takes it as read that the payment decreases when you overpay, because the term remains the same. Hence if you reduce the term, the payment increase back to the same as it was before you overpaid

I think rs65 was thinking about the OP intending to reduce the term by say 5 years, so that monthly payments would be higher. It's often a good idea to do so if you can afford to regularly OP by more than £500 per month, as it stops you getting hit with ERP's (that's how I read it anyhow)...

jsaver

We have been doing a similar thing, overpaying for 5 years or so, and it is very powerful. Read your NW smallprint re getting your overpayment reserve back if you need it. If you can get it back, overpaying will be a GREAT option, as it is reducing your overall sum repaid, while giving you the security of using it as a fallback if you run into financial heavy water one day.

Keep up the overpayments!:)