Nationwide overpayment options - Help!

Seamonster_2

Sorry if this has been asked before, but I’m confused by Nationwide’s overpayment options. I currently overpay £300 per month on my SVR mortgage, and plan to increase this to £500 soon. Once you overpay £500 or more per month, you have the following options:

1) Pay off my mortgage earlier by reducing my mortgage term
2) Reduce my future monthly payments
3) Keep my existing payment and term as-is. (At the next natural mortgage payment change, i.e. interest rate change, my payment will be automatically recalculated).

I want to pay the mortgage off ASAP, so it seems that I want either option 1 or 3. Ideally, I’d like to be able get the overpayment money back at short notice if required (hopefully not), but whilst I don't the mortgage is reducing.

Which option is the best? And are there any charges (i.e. ERC) associated with any of them?

kingstreet

You want option 1. Keep your normal monthly payments as they are and reduce the term.

Nationwide will allow you to borrow back overpayments should you need them.

If your mortgage deal/rate has ended and you are on SVR there should be no early repayment penalties. Check with the lender if you have any doubts.

Thrugelmir

Seamonster wrote: »

Ideally, I’d like to be able get the overpayment money back at short notice if required (hopefully not), but whilst I don't the mortgage is reducing.[/FONT]

You can use the overpayments to create a reserve to reduce future payments. Though not withdrawl the overpayments made as a lump sum.

So 1. may not be the most suitable option if you require access to the money.

kingstreet

"Borrow-back" still applies to mortgages taken out before 4 March 2010.

Borrow Back

If your client has made overpayments on an NBS mortgage where the product was taken out prior to the 4th March 2010, they may be able to borrow it back or take a break from repayments for 3 to 12 months.

If your client has built up an overpayment reserve they can borrow back any amount up to the limit of that reserve for any purpose.

If your client chooses to borrow back their outstanding balance will be recalculated at the next rate change, or at the end of the year (whichever is first).

The new calculations will ensure the mortgage is repaid in full by the agreed date.

Terms & conditions apply.

Sorry. I should have qualified in earlier post.

http://www.nationwide-intermediary.co.uk/content/products/flexible_benefits/flexible_benefits_for_existing.aspx

Seamonster_2

Thanks for the replies. Sounds like option 1 is the one to go for.

motch

Although at a SVR of 2.5% (if you've been with them for a few years) would be worth paying down any other debt first, building up reserve money in isa's, or other accounts paying over 2.5%

TrickyDicky101

My take on the matter is that Option 1 is definitely not the one to go for - if you reduce the term and then borrow back your overpayments (cos need new car/new kidney/whatever) your monthly payments will then shoot up following the borrow back as you now have less time in which to repay the outstanding balance (as you have been reducing your term).

Since you aren't in a fixed rate term, although it may mean slightly more effort for you (eg to modify the total payment you make to the bank each month) either Opt2 or 3 is the one to go for.

kingstreet

TD - unless I'm cracking up, you can return to the original remaining term when you borrow back.

Seamonster_2

OK, I've thought some more about this and I hope I've understood it correctly.

If I went for option 3, I could pay off the mortgage early through overpayments, though I might have to adjust the amount each time the rate changes, to compensate for NW automatically reducing the main payment. The advantage of this approach would be that I would always have access to the reserve, with the full mortgage term available to repay any withdrawals on that if I needed it. Also, I believe it would be permissible get the mortgage down to a nominal sum (eg. £1) so it's effectively paid off, but still retain access to the reserve for the full mortgage term (16 years left of the original 25).

Does that sound correct? If so, I'm leaning strongy towards option 3.

TrickyDicky101

kingstreet wrote: »

TD - unless I'm cracking up, you can return to the original remaining term when you borrow back.

I didn't know that - if that's the case then it doesn't really make any difference which way you go.

kingstreet

TrickyDicky101 wrote: »

I didn't know that - if that's the case then it doesn't really make any difference which way you go.

Yep. True. Now I'm doubting myself as I can't understand why you'd have option 1 and option 3. :eek:

I've had another look at the criteria and I think the clue is in the underpayment option. Provided you've made overpayments, you can then underpay as long as "the mortgage is repaid in full by the agreed date."

I'm pretty sure the agreed date is the original repayment date, so this is retained like a long-stop, so you can move between now and the final repayment date, subject to the amounts you've underpaid and overpaid.

OP - All I can suggest is you ring Nationwide and ask them. Then come back and tell us.