Meaning of N&P 10 year fix overpayment rules

redonion

Am I reading N&P's 10 year fix overpayment rules correctly? I find it hard to tell from their wording.

What I THINK the text below means is if my total loan at the start of year 1 is, say 130,000 and I pay 13,000 MORE than my standard mortgage payments over the course of year 1, there are no overpayment charges. So if I pay standard payments of 675 per month, I may pay up to 21,100 in year 1 without overpayment charges. If I repay 1 pound more than that, I'll pay a 7p overpayment charge (7% on 1 pound). The percentage charge falls each year. When my loan drops below 100,000, the no-charge overpayment figure becomes 10,000 regardless of the 10% overpayment limit.

OR, does it mean that in year 1, to avoid overpayment charges, my loan value must not fall below 0.9 times its initial value. i.e. at the end of year 1, if my loan value is 1 pound less than 130,000 * 0.9 = 117,000, I'll pay 7p on that pound?


Quote from http://www.nandp.co.uk/mortgages/types-of-mortgage/fixed-mortgage/10-year-fixed-rate-75i-18713/

You can pay off your mortgage early whenever you want, but you will have to pay an early repayment charge if you repay in full or if you repay over 10% of the loan (or £10,000 - whichever is lower) during the initial rate period.
Overpayments (monthly or lump sum) up to a total of 10% of the outstanding loan, or £10,000 (whichever is the lower figure) per year are allowed without charge. Any amount repaid over the 10% (or £10,000) limit will incur a charge of the percentage specified on the excess amount:

• 7% in years 1-3
• 6% in year 4
• 5% in year 5
• 4% in year 6
• 3% in years 7-8
• 2% in year 9
• 1% in year 10