Overpay or wait for fixed term end?

mkviken

Hi

our repayment mortgage 5.6% fixed rate is due to end in Jan 2013.

We have been overpaying around £2000 a year on our mortgage and looking at the statements it hasn't made a lot of difference to the balance. we want to over pay £500/month for the foreseeable future but are uncertain on the best way to go.




with the rate were on being 5.6% are we better off overpaying now (£500/month max allowed) or waiting till the fixed period ends, the interest rate drops to BOE rate and unlimited overpayments allowed?

will the £500 + mortgage monthly payment come off the 'top line' figure or will it be lost in interest?


obviously it will save us interest over the course of the mortgage but as were about finished with the fixed term is it best to wait?
thanks for any advice.

iazcac

Does the mortgage drop to the BOE rate, or onto the lenders standard variable rare (SVR). These are two very different things. If the former then well done if drops to BOE raee but suspect will be BOE rate plus x%

opinions4u

If there are no penalties for doing so, overpay now. But check the penalties!

mkviken

It drops to 2.5% in January

There are no penalties if I pay >£500 a month

mysk_girl

Sounds like Nationwide? Those are the terms of my mortgage with them. Anyway, the overpayments will come off the capital sum, so you will therefore pay less interest and save money :beer: - if you go to the online banking and select the "reduce term" option, your monthly payments will stay the same, and the term will reduce every month.

Check what date you reserved your mortgage product on, if it is the Nationwide and you reserved before a certain date (sorry, can't remember what it is) you can withdraw your overpayments at any time without penalty - so effectively you have a savings account at 5.6%, with (almost) instant access. To access your money, you just write them a letter and they send you a cheque, or transfer the money into your linked FlexAccount, if you have one. Last time I did this I had the money within 3 days, although I think they advise it can take up to 10 days. Nationwide do not offer this option on new mortgages taken after a certain date (I think it was sometime in 2010 - don't quote me!), so you do need to check this - it's on their website.

getmore4less

If that is a base+2% tracker followon rate then it will most likely be best to overpay as you go upto the max without penalty.

with 2.5 % it is possible to get better rates on savings so long term not overpaying and saving will be better(based on current rates).

Say you could get 3% (net) on savings, it costs you 2.6% for 8 months, then you save 0.5% for every month after that.

Probably best to just overpay for now, simple and no need to track rates, then when a bit closer to Jan 2013 think about saving when the return will be much shorter.

Build up your cash ISA's.

mkviken

mysk_girl wrote: »

Sounds like Nationwide? Those are the terms of my mortgage with them. Anyway, the overpayments will come off the capital sum, so you will therefore pay less interest and save money :beer: - if you go to the online banking and select the "reduce term" option, your monthly payments will stay the same, and the term will reduce every month.

Check what date you reserved your mortgage product on, if it is the Nationwide and you reserved before a certain date (sorry, can't remember what it is) you can withdraw your overpayments at any time without penalty - so effectively you have a savings account at 5.6%, with (almost) instant access. To access your money, you just write them a letter and they send you a cheque, or transfer the money into your linked FlexAccount, if you have one. Last time I did this I had the money within 3 days, although I think they advise it can take up to 10 days. Nationwide do not offer this option on new mortgages taken after a certain date (I think it was sometime in 2010 - don't quote me!), so you do need to check this - it's on their website.

yes it is nationwide were with

we have the option to take back our overpayments if we want as you said. we have had this mortgage around 4 years now.


we have a flex account and its easy to just transfer money over to the mortgage. i have chosen the option to reduce term not payment. the term has reduced by quite a bit by making the overpayments we already have.

i will pay £500 today and £500 tomorrow as its the end of the month so can just catch the May cut off

Joe_Bloggs

I am on the same 2% plus Base rate deal. It is easy to monitor my mortgage online so I know every overpayment makes a difference. The interest also ticks up in a daily fashion. Thus pay your 500 as soon as there is no risk of early repayment charges.
J_B.

I would be wary about moving money on Friday as there is a very long Bank Holiday Weekend plus coming up. The money may be stuck in limbo earning no interest

mkviken

Takes 2 hours to transfer with nationwide so todays OP is fine but I see what your saying about tomorrows OP 1st June not going thru till after holiday

mysk_girl

Or it may credit the wrong month if delayed by the bank holiday, I know when I do online transfer it doesn't show for a couple of days...

mkviken

I phoned up today and she said it will go thru today (2 hours) and I can OP again tomorrow for June.