Overpaying Mortgage

DaveHemmerman

Hi all, i was wondering how do i go about overpaying my mortgage is it easiest to go into NWBS and hand over the money? I would prefer to do it online as i will be more inclined to do it more often as they wont be any queues. My salary is paid into the Halifax so i am wondering is it possible to set up a standing order to pay into my mortgage? What account/details would i need to give the Halifax and would i be able to just set this up myself online?

Sorry for so many questions but i want to set it up right first time.

Regards

Dave

Indispensable_Hobbes

Well first of all check you can make overpayments on the account or check for any capital payment limit.

I imagine you can either arrange for a standing order to be set up (ensuring it doesn't exceed your capital repayment limit if you have one), get the mortgage co to increase your direct debit, send a cheque or postal order or pay cash to a branch.

If you want to arrange a standing order request a mandate from the mortgage co, fill it in and hand in at your bank or input the details online.

Also maybe find out if you can borrowback your overpaid funds.. you may need them in the future.

joseph_2

Hello,

Ive just started overpaying my mortgage thats with Nationwide. I bank with HSBC. I make my payments online, the amount i can pay will vary monthly. I rung Nationwide and they gave me there account number and sort code and i just make the payment as a "one off" Im allowed to overpay by £500 a month and can get the overpayments back anytime if needed or use it to take a payment break. Hope this helps

Joseph

DaveHemmerman

Thanks for your replys, it sounds like i am in the same situation as you Joseph as i can overpay by £500 each month, i will get in touch with NWBS and ask for the the details and go from there it. It might not be every month that i over pay but hopefull it will probably between £25-£40 a week as i get paid weekly, thats why i wanted to do it online as i will be more inclinde to do it weekly. I was just thinking and hoping it would be as easy as doing any other transaction online.

Regards

Dave

Financial_Savvy

Way to go Dave, making overpayments is the way to go.

I am also with Nationwide, making overpayments through Internet Banking. Takes few days to clear and you see the outstanding balance drop as soon as the payment is credited to your account.

Details from the Nationwide site but call to double check


The Sort Code is "07-00-94"

The Account Number is "44444445".

Your Reference Number is your Mortgage account number. You can find this either on your mortgage year end statement (displayed on the top left hand side) or on your notice of mortgage rate change letter (displayed within the 'Payment Details' box at the bottom of the page). Your account number must be quoted in the correct format as it appears on your statement, including any spaces or dashes.

DaveHemmerman

Thank you Financial_Savvy for the information i will follow it up asap, just think it is so much easier to be able to click a few buttons and see your mortgage decreasing everytime you click, i am 26 at the min with a £60k mortgage, my wife is 35 so i would like to have it paid of by the time she is 50, we have just remortgaged and we knocked 1 year off to make it 20 years from now left, we have a 5 year fixed now at 5.44 (£414 p/m) but when we remortgage again i want to knock another 2 years off at least plus with the overpayments i am hoping this is possible. My wages can vary by up £200 per week dependant on overtime so i will be using some of this to over pay, we still want a life and have still got a few rooms to decorate and we would like a conservatory so i guess its just finding a happy balance.

Regards

Dave

ThankYouAndEnjoy!

DaveHemmerman wrote: »

we have a 5 year fixed now at 5.44 (£414 p/m)

Dave

Hello Dave.

You might want to think about maximising both your own and your wifes ISA allowances before making o/payments onto the mortgage. ISA interest rates vary between 5.8% - 6.1% - the highest being 0.65% more profitable than making o/payments on your mortgage. It all adds up!! - Once you have maximised yours ISAs per year, then any remaining monies, pay off of the mortgage.

DaveHemmerman

Oh right i see, i know this may sound daft but would we then pay a lump off in 5 years time with the isa money we have saved, ie if we saved our full allowance each in 5 years time we would have £30k to pay off our mortgage which would also have reduced with our normal monthly payments to probably around £50k ish which would leave £20k to pay back.

ThankYouAndEnjoy!

hello

Yes, aslong as there will be no penalty for making o/payment, then you can use the full £30k + Interest to reduce the capital.

Kind Regards

DaveHemmerman

Off top of my head i dont think they are any penalties as long as we dont pay over £500 p/m. If we were to remortgage in 5 years time i guess you just ask for less money and give them a cheque for the difference? Ive just been doing some sums and by paying £100 p/m extra takes off 6 years, this is the sort of time i am looking at which would mean i paid it off in 18 years and thats without reducing the years next time we remortgage, i think i am getting addicted, i would love to be mortgage free and buy a nice place abroad, i have also been thinking about buying my grans 2 bed bungalow as she has lived there 30years with the council so she would get full discount, currently it is worth £120k-£130k and would be a great investment for us but i am unsure how it would affect her financially as i guess she gets benefits etc.

ailuro2

I have a theory that paying off your mortgage earns more interest than just the interest rate you pay on your mortgage.

If I were to pay off £100 a month for 5 years on a 20 year mortgage at a rate of 5.5% it would save me £7519 by doing so.

If I were to save £100 pounds a month for 5 years at 5.5% then end of 5 years it is worth £6888.

I reckon this is because at the start of a mortgage we pay interest on the total outstanding, plus an amount towards the capital repayment. As the years go on,we pay less interest and a greater capital amount thereby paying off the remainder of the original loan-by keeping the mortgage payments the same the ratio changes. Hope this makes sense.

Now, by repaying some of your capital sooner, it frees up some of your monthly payment that would have gone on paying interest to be paid to your capital repayment, hence the difference in figures above.

Try it out for yourself- here are two links-

http://www.moneymatterstome.co.uk/Interactive-Tools/GeneralInterestCalculator.htm for how much the savings are worth after 5 years.

and http://www.co-operativebank.co.uk/servlet/Satellite?c=Page&cid=1076576252005&pagename=CoopBank%2FPage%2FtplPageStandard has a calculator link near the bottom of the page that lets you put in overpayments and on the right hand side of the calculator it tells you how much interest you saved.

Try it and see- then put the slider on the savings link up at high as it will go - does the amount yet match the amount saved on the mortgage calculator link?