Overpaying mortgage question

Yorkie1

Flower1976 wrote: »

If you overpay by less than 500 they will not recalculate your monthly payments. For any payments above 500 you can choose whether to reduce your payment, term or neither.

I am not sure that the last bit is correct.

I overpay to NWide by >£500 per month and was categorically told that I had to reduce either payments or term. I rang up twice to ask whether I could choose to reduce neither, and each time was told this was not an option. If you look at the website, for mortgages since May 2013 (I think), this option isn't mentioned either.

OP, when I overpaid by<£500 per month, it didn't reduce either payment or term during my fixed rate period.

Now that I overpay by >£500 (within my fixed rate period), I choose to reduce payment. Every month NWide write to me to tell me how much my monthly payment will be next month. I know how much I want to pay in total towards my mortgage per month, and simply increase my overpayment level every few months to compensate for the drop in amount taken by NWide.

I'm nowhere near my 10% per year total by doing this, but it's something to keep an eye on if figures are tight.

If you want to overpay by more than £500, it's pretty straightforward to do.

Flower1976

Interesting... But this is given as an option on Internet banking so I have opted for it. Indeed I have made an overpayment of more than 500 this month and have not yet received any notification of payment or term change.

Elfbert

Dax42 - I asked this exact question of Nationwide when I began overpaying my mortgage. I chose, via internet banking, to keep everything the same - monthly payment and term - and they assured me I could overpay the 10% in 'additional' payments, and the 'extra' I was paying by keeping my payment amount the same was not counted toward this 10%.

I only changed my mortgage to them in about May 2014 and the internet banking definitely gave me the option to reduce payment, reduce term, or keep both the same.

I do not have any accounts with them except my mortgage - that's all my internet banking with them is for. It's easy to sign up, you can then send them a PM and they will tell you to the penny how much you can overpay and what date you can begin paying the next 10% for the following year. They're very helpful.

enthusiasticsaver

Isn't the objective in overpaying your mortgage to reduce the term? So long as there isn't a charge to do so why should it matter if the term is reduced each time you make an overpayment?

Jonbvn

enthusiasticsaver wrote: »

Isn't the objective in overpaying your mortgage to reduce the term? So long as there isn't a charge to do so why should it matter if the term is reduced each time you make an overpayment?

Not necessarly. The prime reason to overpay is to reduce the amount of capital owed. If you reduce the term and then experience a change in circumstances (lose your job) then you are committed to keeping the same payments. The same is not true with reduced payments. Note that you can continue to overpay even when you have opted for reduced payments.