Nationwide Overpayment Reserve

pollyanna24

I am keeping an old mortgage of Nationwide that lets me "borrow back" any overpayment without question. The rate is 2.5% at the moment (2% over BoE rate).

Is there anything stopping me just overpaying this until there is a tiny balance left and then just leaving this tiny amount knowing that I can effectively get a "loan" without any affordability assessment?

Currently there is a £60,000 overpayment reserve on this account. I have no intention of touching it at the moment, it's just in case everything in my life goes wrong and for whatever reason, I have to use the reserve rather than lose my house.

I suppose I really mean use the reserve as my emergency fund as well.

Thrugelmir

pollyanna24 wrote: »

knowing that I can effectively get a "loan" without any affordability assessment?

Given current regulatory requirements. Difficult to see lenders simply writing a blank cheque. Normally this dealt with through published changes in Terms and Conditions which are sent annually with mortgage statements. Your original contract would allow the NW to revise/vary the T&C's to comply with current legislation etc.

pollyanna24

Yeah, was worried about that.

When I took out a new mortgage earlier this year (further borrowing), I made a point about keeping my original mortgage for the reasons I have stated and person in branch doing the application with me agreed with me and saw my logic and every time I have rang up re my mortgage and asked this question, they say I would be able to borrow back the overpayments because I took out the mortgage before 2009 (when they started saying that you can't just borrow back the overpayment reserve).

I was originally told because I was taking extra borrowing, I would lose my overpayment reserve, but this didn't happen in the end as I made no changes to the existing mortgage and it still appears online and (presumably) will do when I get the end of year statement.

TrickyDicky101

I've just used the borrowback on my Nationwide mortgage to get £60k back on the mortgage as my other sub-account is about to come out of a fixed rate and go onto the SVR (hence I want to use this £60k to pay down against this other sub-account as the rate will be higher than the BMR of the borrowback).

Had to call Nationwide but it was very straightforward and after 15mins was told money will be in our account in 4 to 5 days. We will then transfer it back to NW to the other sub account.

I was worried it could have been a lot more difficult. There were no affordability type questions.

Of course, I haven't yet got the money so maybe I'll be cursing NW in 5 days' time!

pollyanna24

TrickyDicky101 wrote: »

I've just used the borrowback on my Nationwide mortgage to get £60k back on the mortgage as my other sub-account is about to come out of a fixed rate and go onto the SVR (hence I want to use this £60k to pay down against this other sub-account as the rate will be higher than the BMR of the borrowback).

Had to call Nationwide but it was very straightforward and after 15mins was told money will be in our account in 4 to 5 days. We will then transfer it back to NW to the other sub account.

I was worried it could have been a lot more difficult. There were no affordability type questions.

Of course, I haven't yet got the money so maybe I'll be cursing NW in 5 days' time!

Did everything go according to plan?

TrickyDicky101

Yes - all my borrowing from NW is now on the BMR rate. The borrowback was exceptionally easy.

minimike2

Thrugelmir wrote: »

Given current regulatory requirements. Difficult to see lenders simply writing a blank cheque. Normally this dealt with through published changes in Terms and Conditions which are sent annually with mortgage statements. Your original contract would allow the NW to revise/vary the T&C's to comply with current legislation etc.

On the contrary - The FCA have actually "had words" with lenders who have offered such facilities and then tried to start taking them away from customers, owing to the fact it was part of the product which they applied for and thus unfair to force the removal of the facility.

Doesn't stop them suggesting they would like to and assuming they hear nothing back from the customer they will go ahead and do it....

Mogley

When you get to the "tiny" amount left, you cannot just stop paying your mortgage. You will have to ask nationwide to use your last overpayment to "reduce your future monthly payment" instead of "reducing your mortgage term". This will make your future minimum monthly payments low, you will obviously stop overpaying and have the overpayment reserve available for your disposal (like TrickyDicky).


You keep your original mortgage end date and just continue to pay the very low minimum monthly payments until your mortgage term ends.


There maybe better things to do with the money than keep this reserve but I hope this answers the last part of your question.

Thrugelmir

minimike2 wrote: »

On the contrary - The FCA have actually "had words" with lenders who have offered such facilities and then tried to start taking them away from customers, owing to the fact it was part of the product which they applied for and thus unfair to force the removal of the facility.

As with anything there will be caveats. As the FCA are forcing lenders to act responsibly and be accountable for their actions.