Overpaying Nationwide Mortgage

MORPH3US

If the OP is paying interest only, I think Markymark has a point.

On a repayment mortgage (mine for example) the payments each month are £750 (ish) which is usually £150 (ish) off the capital and (£600 interest). So if I overpay then ALL of the overpayment comes off the capital as i've already paid all the interest that month....

However on an interest only mortgage, the capital is constantly X thousand pounds and never changes and you just pay the interest. Because the capital is a constant amount, so too is the interest.

However if you over pay any amount, this will come off the capital meaning that the following month you owe less capital = you need to pay less interest therefore the repayment of the "interest only" will come down....

I think you need to change to repayment or just keep all of your overpayments into savings until the end of the interest only period.

Hope that makes sense and is correct....

M

Karmacat

Sorry italiaboy and markymarkd, I'm not stepping back and thinking intelligently about this at all.

If its interest only, reducing the term is not only no use, but irrelevant ....... (lightbulb moment here) of course! On my interest only mortgage, I'm not changing to repayment because the repayments are much much higher - but if you've got enough money to cover, then fine. As markymarkd says, you will lose the flexibility tho.

Italiaboy

Thank you all for your advice.

I thought this would be the case but thank you for confirming so.

Much appreciated.

Back on the phone to Nationwide now................

macca64

Is it not easier to reduce the outstanding term on your mortgage rather than increase payments? If you ask Nationwide you should be able to change the term to 5 years, your payments will go up, but then you wont need to overpay each month.

Only problem you have then is that you can't stop the over payments as that becomes your standard monthly payment.

Italiaboy

Macca64 - I think its easier to simply change to a repayment mortgage and continue with the overpayments. The only reason I say that is because of any unforeseen evantualities I can always revert back to original position.

The desire to be mortgage free is there as long as life allows it - and wife - and 2 kids.................

abingdonboy

Hi All,

A fixed rate mortgage at 5.44% is good to have and should not be given up in a hurry. What you need to do is work out how much interest you could earn on your £500 a month in the most tax efficient way over the next five years, and compare this with the amount you are going to save by making the overpayments. If you are not using your cash ISA allowance for savings then it may well work better saving it, than paying the money off the morgage.

Also i believe that you can pay £500 of EACH PART of a Nationwide mortgage without incurring penalties, therefore you could overpay by £1000 without penalties i beleive...

Hope this helps,

AB.

Gray0103

abingdonboy wrote: »

Hi All,
Also i believe that you can pay £500 of EACH PART of a Nationwide mortgage without incurring penalties, therefore you could overpay by £1000 without penalties i beleive...

Thats correct, and its what I would od if I ever get to the situation of having £1,000 extra each month

Italiaboy

Thanks.

I am aware that you can pay up to £500 for each part of the mortagage an d currently do so..

To pay earlier than when the fixed rate expires incurs large penalties that I'm pretty certain outweigh the benefit of paying it off within the fixed rate period.

Using calculators, I have calculated how much is required on each part of the mortage to ensure it is paid for when the fixed rate ends. Pretty happy with that.

It is a goal of ours and one we believe is now within reach...

Trying_to_be_good

Italiaboy

Someone above asked about if you were saving in a cash ISA - the other thing (if you've already done this) is to save excess in a regular savings account - Nationwide pay 6.75% on their account so long as you add £200-250 per month, and this isn't limited to a one-year term: http://www.nationwide.co.uk/savings/rates.htm

Italiaboy

Thanks Trying to be Good.

I should have answered but our cash ISA allowance has been taken up for this year. I didn't know about the Nationwide products. With the overpayments we are probably struggling to reach £200 - £250 minimum per month but will look into it all the same.

Thanks again. Very much appreciated.