5 year fixed at 5.99 due to end Sept 2014

Seker

Wow, just done the calculator and with this 5.99 rate applied it would save me £23,089 and shave off 6yrs and 2mths. That is fantastic.

SillySod

Just fyi, although my contract was not specific about the monthly payment being reduced after an overpayment, NatWest insisted that it should be reduced so that the term remained the same.

You can get round this by filling out a form ("Change agreement/variation of contract") to reduce the term to bring the monthly payment back up to what it used to be.

There is a piddly fee (relatively speaking) of £35 but in my case it was waived when I argued that there was no basis in the contract for reducing my monthly payment.

I did this twice for the two years of fixed term, then I was free to overpay at my leisure.

Seker

That sounds slightly confusing.
I will call tomorrow and see what they say. Sounds like they want a fee for nothing.

Weird_Nev

It's not realyl a fee for nothing. You signed up to a 22 year mortgage, your overpayments would reduce the term of that mortgage, so you are changing the terms of the contract. £35 doesn't really sound too bad to be honest! You are costing them £22k after all!

Definitely make overpayments, we did, when we had a high mortgage rate too, and it really helped out. Not just in terms of reducing the interest paid, but we went around the world and didn't have to pay our mortgage for3 months, which was bliss.

Seker

I guess so when you put it like that. I feel like a fool, because this money I have been putting to one side for 4 years could have been eating into the interest. But, at least I'm trying now.

The other thought that did cross my mind to like your trip away, was should we have another child it may be easier too in this respect should that child come along! :-)

originalmiscellany

At least you've realised it now, and it's far from too late! Like you, I didn't realise the power of overpaying immediately, so for the first 5 years of my mortgage, I did nothing other than keep the payments the same as it was a good interest rate (at the time - 3.99%!) and I was accepting I would pay for 25 years. However once I was made aware that overpayments would make such a difference I jumped in both feet first, but also annoyed that i hadn't started years earlier.
Hey ho!

Seker

Ok, so phoned Natwest and was totally confused by what the man was saying to me :-( He was trying to get me to pay the 5k as an overpayment and pay the additional £150 per month, when I asked what difference it would make he replied 'none, the term remains the same'. But then gave me the option of a change in contract to fix the overpayments and pay the 5k and that would reduce the term...

Does this make sense?

Tahlullah

Looks like what Silly Sod has been saying. You want to reduce the term of the mortgage, not reduce the monthly payments. I am not clear if you wish to also increase your usual monthly payment by £150, but you could choose to hold the monthly payments the same and save the £150's so you have a cushion, or you could just go ahead and increase the monthly payments by this amount, which will allow you to become MF faster.

Up to you. Depends on if you are sure you can afford to make the extra £150 overpayment forever without fail.

Seker

Hi,
Yes your right, I wish to increase the monthly payments. I have worked out my finances and all seams ok to go ahead, just feels a bit daunting at the moment.

Can I pick up on you comment re ''overpayment forever without fail''? Am I right or wrong here - If I set the monthly payment to £800pcm (£664 original monthly payment and £137 overpayment) would it mean that I would be paying the £800 for the term of the mortgage OR until I change the product next year? This part I am unclear about.

Calfuray

As far as I know, there are two ways it can happen.

Number one, say you normally pay £250 over 15 years. You can say 'I want to shorten my term', to say 10 years, which would work by increasing your monthly payment, so you pay higher that £250. Now, they will allow you to do that quite happily. However, if you then decide to increase your term back up to 15 years, they may reevaluate the mortgage and do an affordability check etc, which means there is a small chance they may reject you, and you are stuck on the higher payment.

Option two, is what I'm currently doing, my monthly payment is about £250, but I've asked them to increase it to £300 without changing the term - in reality I would eventually have a shorter end date, but I haven't formally changed it.

Does that make sense?