Changing Mortgage Repayment Years on a Variable Rate

dshart

If they are keeping it in a pot and interest is added yearly then check what interest rate if any they are giving you on this pot of money. If you can get a better interest rate elsewhere then put the overpayments there and overpay at the end of the year.

Maybe one of the mortgage advisers who post on here may be able to better explain your options to get the most out of your money.

KarenBB

When you make a payment or overpayment on the N'wide mortgage the payment is taken off the balance an the interested is calculated on the lower amount. Interest is calculated daily, it shows on your statement once a year, showing interest 31/12/??. If you register to see your account online you can see how much interest has been charged so far this year.

As the interest rate on bmr is currently 2.5% it's like getting 2.5% net interest on anything you overpay with quick access if you want to borrow the money back. You have to write to request it and it takes about 10/14 days to have the money back in your account

When you make an overpayment a total is kept of the overpayments made, this increases every time you overpay and doesn't disappear at the end of the year. If you paid £100 a month extra for 2 years eg January 2010 to December 2011 your year end statement in January 2012 will show - overpayment reserve £2400 (just checked my statement for wording). This is the amount you can borrowback should you need to (as long as your product allows you borrowbacks - the bmr does but new products don't). Or you can use this amount to not pay your mortgage until the overpayment reserve is 0 (this is on all products).

You can check your balance and then see how much you'd need to pay each month to effectively reduce the term to 20 or 25 years or call N'wide and ask them how much you'd need to pay. I overpay the mortgage but don't have the term reduced, this means I chose how much extra to pay and keep the flexibility to pay only what is required if I want to. eg if you're payment are £500 on your current term but you'd need to pay £600 to reduce the term to 25 years, you can let n'wide collect the dd for £500 and set up a standig order for the extra £100 and even though your term is 30 years it would be paid off in 25 years - if the rate stayed the same etc. Detilas on how to overpay on on N'wide website.

Hope all of that rambling makes sense

beecher2

http://www.nationwide.co.uk/mortgages/existingcustomers/overpayments.htm

Overpayments of £500 or less
If you overpay by exactly £500, we will reduce your payment from the following month.
If you overpay by less than £500, your monthly payment will be reduced at the next rate change. Your interest is calculated daily, so your overpayment will still reduce your balance immediately and you'll start to be charged less interest, but your monthly payment won't reflect this straight away.


Overpayments of more than £500
We will reduce your payment the following month.

This explains the difference - your balance is being reduced no matter how you do it, and if you're happy to keep your payments the same it won't make any difference.

GreenSaints

Fabulous!

Thank you

dshart

Actually GreenSaints if your mortgage works as explained by KarenBB you may be best using the overpayments to eventually reduce your other debts. Looking at your signature you have quite a few debts and although they are currently at 0% I assume those will eventually expire and revert to a normal interest rate which will be higher than your mortgage rate. If at the time you cannot move them to another interest free card then your finances could drastically change. Just something to bear in mind.

KarenBB

dshart wrote: »

Actually GreenSaints if your mortgage works as explained by KarenBB you may be best using the overpayments to eventually reduce your other debts. Looking at your signature you have quite a few debts and although they are currently at 0% I assume those will eventually expire and revert to a normal interest rate which will be higher than your mortgage rate. If at the time you cannot move them to another interest free card then your finances could drastically change. Just something to bear in mind.

I'd noticed the credit card balances too. Rather than have balances on a credit card rate a borrowbac would make sense to me.

While on the BMR the overpayment can be borrowed back at anytime. If you take a new fixed rate you lose the facility to borrowback the overpayment but you can still use the overpayment reserve to underpay in the future - details from n'wide website
'When you overpay this builds up an overpayment ‘reserve’, which you can use to either reduce your monthly payments by a set amount (e.g. £50.00 per month), or stop making payments for a set period. You can use either part or all of your overpayment reserve to do this, but the maximum amount you can underpay by is the value of the overpayment reserve you have built up.
When you underpay, your monthly payment will be recalculated at the next rate change (variable rates only) or at the end of your product term, depending on which is first.'

GreenSaints

dshart wrote: »

Actually GreenSaints if your mortgage works as explained by KarenBB you may be best using the overpayments to eventually reduce your other debts. Looking at your signature you have quite a few debts and although they are currently at 0% I assume those will eventually expire and revert to a normal interest rate which will be higher than your mortgage rate. If at the time you cannot move them to another interest free card then your finances could drastically change. Just something to bear in mind.

The mortgage is a joint with my BF whereas the CC are my own personal debt.

I pay in a fixed sum of money into the 'joint account' (as does he) which then goes towards the mortgage and all bills. So the overpayments come out of that pot.

But thank you for the advice anyway