Overpayments with Nationwide

inatdeepend

I've been looking at Nationwide mortgages re overpayments and not sure if I've got this right. It states:

"If you overpay by exactly £500, we will reduce your payment from the following month. If you overpay by less than £500, your monthly payment will be reduced at the end of your fixed rate period."

So does this mean if I overpay by £500 or more , the "normal" monthly repayment amount is reduced, but if I overpaid by £499.99 it would just stay the same?

I say by £500 or more, as it also says:

"You can make overpayments of 10% or less of your original mortgage balance per mortgage anniversary year without incurring an Early Repayment Charge (ERC)"

So therefore I could make a £1000 overpayment every month if I really wanted to (assuming a mortgage of greater than 120K)?

Yorkie1

Yes, if you overpay by less than £500 nothing changes during the fixed term. When you get to the end of the fixed term, the monthly payment on the standard variable rate is worked out on what you continue to owe.

If you overpay by £500+ in any month, you'll initially get a letter saying they've reduced the term (i.e. your monthly repayments remain the same, but the overall length you've got left to pay it off has shortened). You can choose to go with this or, as I've done, opt for reduced payments instead with the same overall term. So, every month I overpay by £500+, I get a letter saying that my payment the following month will be a bit less.

I've chosen the latter as it means that I retain the flexibility of the longer term once out of my fix, in case my circumstances change and I want to pay reduced amounts over the longer term.

As I use a S/O to overpay, I just go online every couple of months and readjust it so that my overall payment per month (i.e. DD plus o/payment) remains at about the same total. This is OK at present, but as I get towards the end of my fix I'll need just to keep an eye out that I'm not approaching the 10% total of the original loan per year.

inatdeepend

Great, thanks very much, exactly what I wanted to know!

beefturnmail

A third option (which I've opted for) is to keep the term and payment as is. That way you overpay a little bit extra in month (by the amount your monthly payment would have reduced by), plus you keep the flexibility of maintaining the longer term if you ever wanted to borrow back/more (and of course you will still pay off completely in less time than the 'term')

kingstreet

Be careful.

Older Nationwide mortgages (pre-29 May 2013) had the £500 per month penalty-fee overpayment limit and this was changed to 10% of the original mortgage advance about eighteen months ago for new mortgages.

Check which one applies, as it isn't both.

http://www.nationwide-intermediary.co.uk/products/mortgage_features/overpayments

jimjames

If you log in to Nationwide online banking you can choose which option to apply to your account.

So if the default isn't what you want you can set it differently.

Yorkie1

beefturnmail wrote: »

A third option (which I've opted for) is to keep the term and payment as is. That way you overpay a little bit extra in month (by the amount your monthly payment would have reduced by), plus you keep the flexibility of maintaining the longer term if you ever wanted to borrow back/more (and of course you will still pay off completely in less time than the 'term')

I rang up and they wouldn't offer me this. Are you overpaying by more than £500 per month, and when did your present mortgage product start?

beefturnmail

Yorkie1 wrote: »

I rang up and they wouldn't offer me this. Are you overpaying by more than £500 per month, and when did your present mortgage product start?

I'm overpaying bang on £500pm (which is the max without incurring ERC). Current mortgage started March 2013, been a Nationwide mortgage customer since September 2012. If you have internet banking and go to 'overpayments' you can select how you want payments to be treated; this is the third one listed.

Yorkie1

Ah that is the difference. I am paying more than £500, as was also the basis for the OP's question. Your option will not be available to the OP.