Overpayments waste of time/money???

lauren565

Hi i am currently in a 2 year fixed deal with nationwide and have been making the allowed £500 overpayment every month to reduce the term. I have just realised this is possibly a big mistake I have made because I am planning on remortgaging when this deal is up but have to go to another lender, because nationwide do not do offsets and i ideally want an offset. I have reduced my term but it has just occurred to me that I should have put this money in a savings account and when I went to remortgage with another lender, should have whacked that off it then. God what have I done?????:(

anselld

It is fine. There is no advantage to saving then paying off in a lump unless you could save at a higher (net) rate than your mortgage interest rate. In fact with savings rates as they are you are probably better off with regular overpayments.

kiddakidda

lauren565 wrote: »

Hi i am currently in a 2 year fixed deal with nationwide and have been making the allowed £500 overpayment every month to reduce the term. I have just realised this is possibly a big mistake I have made because I am planning on remortgaging when this deal is up but have to go to another lender, because nationwide do not do offsets and i ideally want an offset. I have reduced my term but it has just occurred to me that I should have put this money in a savings account and when I went to remortgage with another lender, should have whacked that off it then. God what have I done?????:(

And you have also reduced the overall amount of your loan at the same time and increased the equity within the property.

When does the 2 year fix end?

lauren565

Thanks but if I am not planning on staying with nationwide then I think I shouldnt be concentrating on reducing the term. Do you think Id be able to get it back and then put it towards a better deal with another lender?

lauren565

It ends April 30 2015.

kiddakidda

lauren565 wrote: »

Thanks but if I am not planning on staying with nationwide then I think I shouldnt be concentrating on reducing the term. Do you think Id be able to get it back and then put it towards a better deal with another lender?

Fundamentally it's the same thing, you are also reducing the amount you owe which will improve your position when re mortgage time comes around.

Or am I missing the point?:)

anselld

lauren565 wrote: »

Thanks but if I am not planning on staying with nationwide then I think I shouldnt be concentrating on reducing the term. Do you think Id be able to get it back and then put it towards a better deal with another lender?

Reducing the term is just another way of saying reducing the outstanding balance. You will get exactly the same benefit at the point you switch providers, i.e. you will have more equity in the property.

Annisele

lauren565 wrote: »

Thanks but if I am not planning on staying with nationwide then I think I shouldnt be concentrating on reducing the term. Do you think Id be able to get it back and then put it towards a better deal with another lender?

So far as the new lender is concerned, the important thing is the outstanding balance. Your overpayments have brought that down - but they'd have brought it down regardless of whether or not you'd chosen to keep the term the same with Nationwide.

I think that what you've done is a perfectly reasonable strategy. The only problem with it would be if you couldn't afford the shorter term - but you've said nothing to suggest that. Even if you couldn't afford the shorter term, you could try to get a longer term with a new lender (or even with Nationwide).

lauren565

Oh thanks. So confusing knowing what is best to do. Im fighting a real battle here trying to get the mortgage down as much as I possibly can before the deal ends and then by April the interest rates might have risen so I might get a rubbish deal. My loan to value is currently 52% so I am hoping to still be able to get a good deal. Can anyone recommend the best offset mortgages to start looking at? I was going to start looking around and maybe open a current account with that lender now to get a good credit history with them?

Thanks for all your replies. This mortgage is actually giving me nightmares. No kidding. I keep waking up in cold sweats about how much we owe and its £20 interest added daily. That is terrible I think. Mortgage 184, value 320.

Thanks Lauren !!

lauren565

oops sorry my ltv is 57%. But it will be 52% by april!

kiddakidda

lauren565 wrote: »

Oh thanks. So confusing knowing what is best to do. Im fighting a real battle here trying to get the mortgage down as much as I possibly can before the deal ends and then by April the interest rates might have risen so I might get a rubbish deal. My loan to value is currently 52% so I am hoping to still be able to get a good deal. Can anyone recommend the best offset mortgages to start looking at? I was going to start looking around and maybe open a current account with that lender now to get a good credit history with them?

Thanks for all your replies. This mortgage is actually giving me nightmares. No kidding. I keep waking up in cold sweats about how much we owe and its £20 interest added daily. That is terrible I think. Mortgage 184, value 320.

Thanks Lauren !!

You shouldn't do that to yourself. You are in a good position with a very healthy LTV, and being able to pay off £500 PM in overpayments..................... !!

I'd sleep very easy if I was you.