Can someone check my logic please?

inigma

Hey Beautiful people,

I'm about to start overpaying my mortgage, i'm with Nationwide on a fixed rate so the maximum I can overpay is £500 per month. Reading up on their website they state:

"If you overpay by exactly £500, we will reduce your payment from the following month."

That's great I will start to see a reduction in my mortgage repayments each month if I overpay! (So if i was paying £600 a month for my mortgage and I overpaid by £500 each month then the following month my mortgage payment might be £590)

However reading on they then state:

"If you overpay by less than £500, your monthly payment will be reduced at the end of your fixed rate period. 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."

So my understanding is that if I overpay by £499.99 then my monthly amount won't decrease but my overpayment's would increase. (So if i was paying £600 a month for my mortgage and I overpaid by £499.99 each month then the interest payments would decrease but as I am still paying the £600 I am actually overpaying more).

Does that make sense?

spuunge

Makes sense to me. Nationwide are quite flexible with what your over payments actually do if you call them anyway (at least that is the case on my nationwide mortgage).
When I was still on my fixed rate, I overpaid by the £500 maximum, but asked them to keep my payments the same and therefore use it to reduce the term rather than reduce the monthly payment.
So I guess what you do depends on what you prefer, to pay the same and reduce the time you have the mortgage, or keep the term the same and reduce your monthly payment.
Either way, the information they have given is only what would happen automatically if you don't tell them otherwise.

stedwell

Hi Inigma
I think your understanding is right there.
I am with the Nationwide and I know I have to pay the full 500 for it to impact on my payments which in my case is decreasing the term of the mortgage. I know one month I paid 200 and then 300 and nothing happened. When I rang up they said I had to make the full 500 payment in one go but not a penny more or I would have an ERC.