Overpayments with NATWEST

Southernman

I overpay a Natwest mortgage ad hoc and it takes a few working days to show on the mortgage itself. When you overpay by £1000 or more in a lump sum this will then recalculate the monthly payment and consider other smaller overpayments you may have previously made (under £1000).

TheShape

I wouldn't discount the benefit of over-payments reducing your monthly payment. Ultimately could be very useful if your income was reduced as you'd have less money to find to pay your mortgage.

Every over-payment reduces the interest you have to pay.

If your ad hoc over-payment results in your monthly payment being reduced by £2 then you're saving £2 per month that you can then use as a regular over-payment of £2 per month towards the mortgage. Every time an over-payment reduces your monthly payment you can adjust your own over-payment upwards to compensate.

Ultimately you'll get to the point where you might have a mortgage payment of £5 per month with 100 months remaining of the term. At that point a payment of £500 would end your mortgage 100 months early. Subject of course to any early repayment penalties.

amillionlittlepieces

FlashBarry,

Did you ever get to the bottom of this? I had taken a Natwest Mortgage out last November and am going to start overpaying. I read online that payments over £1000 would trigger an automatic reduction in monthly payment amount, but it is unclear as to what a payment of less than £1000 does. When I spoke with an 'adviser' they said that it wouldn't reduce the term. When I pressed and said that my balance would be lower and therefore take less time to pay off, they just replied with 'it won't reduce the term'.

Have you had any more luck understanding?

themanbearpig

amillionlittlepieces wrote: »

FlashBarry,

Did you ever get to the bottom of this? I had taken a Natwest Mortgage out last November and am going to start overpaying. I read online that payments over £1000 would trigger an automatic reduction in monthly payment amount, but it is unclear as to what a payment of less than £1000 does. When I spoke with an 'adviser' they said that it wouldn't reduce the term. When I pressed and said that my balance would be lower and therefore take less time to pay off, they just replied with 'it won't reduce thIe term'.

Have you had any more luck understanding?

I'm in a similar position. I didn't realise there was this £1000 rule at Natwest for overpayments - it's quite a dodgy way for them to keep charging interest on an 'assumed' balance.

How I understand it is if you pay £999 overpayment for 12 months, the interest that has been pre-arranged (in the illustrations) won't change. So effectively you have paid 11,998 off the capital, but have paid the interest as if you had never made those payments.

However if you pay £1000 a month, it will recalculate the interest every month and will take into account that £12,000.

Interesting their own overpayment calculator doesn't reflect this scenario.

amillionlittlepieces

themanbearpig wrote: »

I'm in a similar position. I didn't realise there was this £1000 rule at Natwest for overpayments - it's quite a dodgy way for them to keep charging interest on an 'assumed' balance.

How I understand it is if you pay £999 overpayment for 12 months, the interest that has been pre-arranged (in the illustrations) won't change. So effectively you have paid 11,998 off the capital, but have paid the interest as if you had never made those payments.

However if you pay £1000 a month, it will recalculate the interest every month and will take into account that £12,000.

Interesting their own overpayment calculator doesn't reflect this scenario.

I've actually spoken with Natwest today and reached an advisor who gave a clearer explanation of how it works.

If you pay over £1000 it automatically adjusts the monthly payment - that's the easy bit.

If it is less than £1000 then the owing balance is reduced and therefore the amount of interest you will pay is reduced.You will pay less interest and the term will reduce if you kept the mortgage for the full duration. Your contractually duration won't change, but the actual duration will.

getmore4less

As above, where people go wrong is asking to reduce term when what they really mean is don't reduce the normal payment.

Not helped by sites that don't explain it properly.