NRAM Together Mortgage - overpaying unsecured loan element

cls1978

Hi - my husband and I bought our house in 2006 with a Northern Rock Together Mortgage. We now have £27k outstanding on the unsecured loan and £129k outstanding on the secured loan. Unfortunately our house is now valued at approximately £130k, therefore remortgaging is not an option. We aren't getting much of a return on our £5k savings so am considering paying it onto the unsecured part of the loan.

Does anyone know if this would be a sensible option? Would it reduce the monthly payments? If I continued to pay the same amount (that I'm paying now) would this be classed as an overpayment that would benefit me in the long term? Any advice appreciated!

DVardysShadow

Provided you have an emergency fund available and won't need to access the money, it makes sense to overpay. You don't say what the interest rate is on the unsecured part, but it will probably be beyond your wildest dreams for any savings account.

It depends on the exact terms of the agreement with NR as to what overpayment will do - but it will either shorten the term or reduce your payments. If it reduces payments, you should ringfence the savings and put them back into paying the loan down, which will ultimately reduce the term substantially.

dimbo61

Please make sure you have some savings for that big emergency that might happen.
If you have the money to pay off a lump sum or overpay the loan every month without penalty then go for it.
Speak to NR on tuesday

cls1978

Thank you for your replies. The interest rate on both the secured and unsecured loan is currently 4.78, much more than any savings account. We would still have almost £3k set aside for emergencies after paying £5k on the unsecured loan plus I have spoken to my Dad who has kindly agreed to help us should we need him to. My main issue is to try to reduce the unsecured element as quickly as possible - by paying this lump sum, then overpaying it each month. I shall ring NRAM tomorrow - thanks again.

silvercar

If the interest rate on the unsecured and the secured are the same, I would reduce the secured charge not the unsecured...just in case you ever want to move.

cls1978

That's a good point, however if you separate the secured/unsecured loans (an example would be if you remortgage) then NRAM increase the interest rate on the unsecured loan to 8% about the SVR.

Raxx_2

We had a similar dilemma recently. We had about 151k on secured lending and 20k odd on un-secured lending with this same product from NR/NRAM. With help from family and savings we now cleared the un-secured for two reasons;
1. It's not easy to remortgage this product if you have secured/un-secured as the new lender will only remortgage the secured which leaves you with the problem I point out in '2'

2. If you move the secured loan then the un-secured loan rate rises to nearly 9%!

Also when you make overpayments to NRAM send a cheque so it's traceable (well I did anyway). I have found NRAM making lots of errors when processing overpayments and many times have had to correct them. Scary when they look after such important accounts.

If you are out of any fixed term then there should not be any penalty for overpayment. Just watch NRAM's poor admin capabilities.........