Rewarded compensation, paid towards mortgage, Capital Repayment or Overpayment.

Legacy_user

Hi,
I have a Repayment Mortgage that was with Northern Rock but it is now known as NRAM. It states first movement was 04/04/2006, I have under ten years left to complete. Monthly Direct Debit payments differ slightly- 01, 02, 30 31 of the month. I am not sure how my interest is worked out, however I get a yearly statement and on 2013/2014 it states my 12 monthly payments in a long list. Payment Due, then underneath this Direct Debit, then underneath this Interest Debit 4.54% which is consistent down the list, but actual payments differ from £60 to 49 interest and this is repeated for the year down the list so I’m guessing this tells me I pay interest monthly.



I have been awarded £3000 Land Compensation from a local county council for reasons I do not wish to state and this has to be paid to NRAM as if it was proceeds of sale, this is the only way with no other options. My question is… Should I choose Overpayment (lump sum of balance, payments stay the same, or Capital Repayment where Balance the same payments are lowered?


I phoned NRAM a month ago for an update and after a discussion requested that when everything was sorted out I would like the Overpayment option, the advisor told me that it would automatically be a Capital Repayment if I didn’t choose however I don’t have this in writing.


Yesterday, I contacted NRAM again in the evening and they told me that the payment had been settled weeks ago, under the Capital Payment option. I made clear how angry I was about not being notified that the payment had been made and that they had done the opposite option to what I had requested. I was asked to ring back and speak to a mortgage department and not to panic as it doesn’t take effect until the 1st September. I couldn’t manage to wring back due to family commitments but I will phone them before the weekend when I have done my research.


Sorry for the waffle, but can anyone advise me which option to take, the importance of dates, and which dates I should choose if given the option, as I obviously want it to go to my advantage and not NRAM’s.


Thank you for your time.

Southend1

Why be angry if you didn't know which option was best? Life's too short.

Anyway....

Capital repayment will reduce the capital balance thus lowering your contractual monthly payment and the term will remain the same.

Overpayment will leave the amount sitting as a credit on your account and should (check this with NRAM) reduce the interest cost. The contractual monthly payment will remain the same, so effectively you will repay the mortgage quicker. Sometimes you have the option to make under payments to the value of any overpayments made so this could be a more flexible option for you.

Hope this helps.

System

Hi Again,

Thanks for this information, however after speaking to two further NRAM agents I have been informed that because it is compensation ( he called it insurance) I have no option but to take the Capital Repayment option, however if I did make a payment from my own money then I would be offered the option which would obviously be the Repayment to reduce the term to pay off the mortgage sooner.

I also asked to speak to someone higher in the mortgage department but I am not allowed as this is not procedure, but the advisor put me on hold and claimed that he did speak to them and explained the outcome. The only other person I could speak to was another agent lol... ( bearing in mind that the previous three agents, including another one this morning, told me that I had the option) due to the stress and what seems an obvious outcome I declined. This apparently is all in my contract.

So it appears that it does matter to NRAM, which option you take as they make the money through the long term interest, Surprise surprise. It also appears that the agents or at least one of them is useless and I have never come across not being able to actually speak to someone higher in command in any department of any description before.

In summary, I only owe £ 8000 so I can't re-mortgage to another bank as no bank is interested in me, I am small fish. The minimum mortgage is £25,000'ish- £50,000 which defeats my objective of paying off avoiding debt and paying my mortgage off sooner.

Do you know if there is anyone I can complain to Ombudsman etc? So grateful for your time thanks again.

Southend1

It doesn't actually make any difference to you in reality. Now they have taken the capital repayment and cut your monthly payment you can either ask to make a regular monthly overpayment which brings your repayment up to the same amount you used to pay, or save the difference in an isa and pay off a lump sum in the future. I don't think a complaint will go very far as I can't see how you are out of pocket

System

Thank you for your advice which makes sense now that you have mentioned it however NRAM haven't brought this to my attention.

So instead of paying the new reduced £144 a month, which starts on Sept 1st, let NRAM know and keep payments at £195 a month till the end of my mortgage and this will kind of work out the same as if the £3500 was paid as a one of Overpayment and it won't take 6 yrs 8 months to finish paying off the mortgage which is what I want.

It sounds so easy and you have stated the obvious, but I am useless with mortgages and the mumble jumble of it all. I will contact them again tomorrow and if there isn't a fee for this then it is the way forward.
A big thank you.