Nationwide mortgage: overpayments & porting

imperio

Dear all,

We currently have an outstanding balance of around £50,000 to pay on our mortgage. Mortgage is with Nationwide, on the BMR, and we have overpayments of around £50,000. 7 years to go, having shortened the term from 20 years. House value around £200,000. We'd like to move to a house worth around £330,000. Current monthly payments just under £1000 / month. My salary £50,000; wife's income is around £8000, self-employed for the last couple of years.

If I've understood everything correctly, my plan is this:

1) Borrow back the overpayments and port the £100,000 to the new house, keeping as much as possible on the BMR. Extend the term back out to 20 years.

2) Sell our house for around £200,000, giving a deposit of £100,000 (equity) +£50,000 (overpayments) = £150,000 for the new house.

3) Get a new mortgage for the balance, around £80,000.

For the new mortgage, something like the Nationwide 10 year fix at 3.49% over 20 years. This monthly payment, plus the payment from the 20-year BMR mortgage, would come to a little over £1000 per month. Can overpay on both of these - clearly would overpay the one with the higher interest rate at any given time.

Does this make sense? Is it possible? Is there anything obviously better? I'm sure a broker would be able to fine-tune this - I'm trying to work out for myself what our options might be.

Thanks!

Pete9501

Don't think the figures add up. You have £150k of equity and want a new property at £330k, so new mortgage of £180k.

No point in borrowing the over payments back, it just adds complications. The latest fixed rates from the Nationwide are so close to the BMR of 2.5% we went with a new 5 yr fix instead. The 10 year rates are a little more but still pretty cheap. If you take a new mortgage you loose some ability to over pay by more than 10% a year and you fix rather than track the BoE lending rate, not that it can go much lower. Also payment holidays are no longer available.

I found our Nationwide MA very helpful going through all the options before we settled on a new fixed rate. Shame we didn't wait another fortnight because they cut the rate by another 0.1% in mid October, still can't have everything.

imperio

I know I'll need a mortgage of £180,000 - this would be £100,000 of ported BMR mortgage plus a new mortgage of £80,000.

My thinking is that borrowing back the overpayments and porting gives me unlimited overpayments on £100,000, at 2.5%, but I can overpay 10% per year of the more expensive mortgage first. Roughly, half the total mortgage is cheap and flexible, but if/when interest rates rise, I've fixed half of the mortgage at 3.5% for a bit of protection. As you say, there's not much difference right now between the BMR and the fixed rates.

TrickyDicky101

We did something similar with you in 2011, borrowing back our overpayments and taking the balance on a 5 year fix. We had £110k on BMR and £89k on fix. One of the reasons I wanted to do this at the time was because of the quoted flexibility on overpaying the BMR portion and being able to borrow it back. However, recent posts on here indicate it may not be so straightforward to do that now (borrowing back) so I would need to think carefully about doing it again.

kingstreet

I can't see anything wrong with the plan in principle.

If it suits the OP's requirements, it's exactly how it can be done.

kingstreet

TrickyDicky101 wrote: »

We did something similar with you in 2011, borrowing back our overpayments and taking the balance on a 5 year fix. We had £110k on BMR and £89k on fix. One of the reasons I wanted to do this at the time was because of the quoted flexibility on overpaying the BMR portion and being able to borrow it back. However, recent posts on here indicate it may not be so straightforward to do that now (borrowing back) so I would need to think carefully about doing it again.

Borrow back is still showing on the Nationwide website, but is restricted to those who took out their mortgage prior to 4/3/10;-

http://www.nationwide-intermediary.co.uk/products/existing_nationwide_borrowers

Borrow Back

If your client has built up an overpayment reserve they may be able to borrow back any amount up to the limit of that reserve (for mortgages taken out prior to 4 March 2010).

More information for your client, including how to request to borrow back overpayments, is available on our consumer website.

Terms and conditions apply.

The only question is taking a new mortgage and porting BMR going to mean your borrow-back is subject to the new T&C and now gone, or still available under the port T&C of the old deal?

TrickyDicky101

The reason why I mention borrow back is that in my mortgage offer (and I assume everyone else's with borrow back) it explicitly states I can borrow the money back for any reason and at any time (subject to written request by all named on the mortgage).

Several posts on MSE have shown people being subjected to affordability checks when attempting to borrow back in recent times (I wasn't subjected the last time I did this in 2011). So whilst borrow back nominally exists on these mortgages, taking advantage of the facility may be difficult.

imperio

Thanks all. I *think* that since we've had our mortgage for long enough, I can borrow back the overpayments and port with no problem (affordability permitting), but I'm not clear what happens if I port the mortgage *without* withdrawing the overpayments. It seems a bit hopeful to expect to port it and borrow back the overpayments *afterwards*. This would be ideal - I phoned today to ask, but didn't find anyone who knew!

Thrugelmir

imperio wrote: »

It seems a bit hopeful to expect to port it and borrow back the overpayments *afterwards*.

In the process of porting you'll be making an application for a new mortgage. By default you lose any existing terms and conditions and move onto new ones.

imperio

Thanks - yes, I thought so! So we apply for a new mortgage, and request to port the BMR rate for the amount we currently have on that.

kingstreet

imperio wrote: »

Thanks all. I *think* that since we've had our mortgage for long enough, I can borrow back the overpayments and port with no problem (affordability permitting), but I'm not clear what happens if I port the mortgage *without* withdrawing the overpayments. It seems a bit hopeful to expect to port it and borrow back the overpayments *afterwards*. This would be ideal - I phoned today to ask, but didn't find anyone who knew!

You have to borrow back the overpayments first, to maximise the amount you can port at BMR. This is based on the outstanding mortgage amount on the day of completion of the sale and the purchase.

If you don't, only the current amount outstanding can be ported on BMR, increasing the amount you'll need to take in the new product.

You'll have the borrowed back overpayments in your hand to use as increased deposit, instead of equity in your home being used for the same purpose.