NatWest - paying off 10% and they won't decrease term

lilyp

Hello, hoping for some advice please.

We are about to be starting our 3rd year of a NatWest mortgage. We were told we could over pay 10% a year for the first three years. A few months ago after a lot of faffing on NatWest part we paid 10% off but they refused to reduce our term and reduced our monthly payments instead. It means we don't gain on reducing interest.
Is this allowed? I did feel we had been missold to as we had stressed we would want to pay down the mortgage when we took it out.
We want to pay off another 10% this month but I'm wondering if I should bother.

Caz3121

lilyp wrote: »

but they refused to reduce our term and reduced our monthly payments instead.

on what basis did they refuse?
from their website it does state that regular overpayments reduce the term and lump sum reduce the payments by default however it seems to imply they can do otherwise

If you make a lump sum payment, we may recalculate your contractual monthly payment and this may reduce. If we do reduce your monthly payments, you won't pay off your mortgage any earlier than the agreed end date
If you want to pay off your mortgage sooner than the agreed end date, please contact us on the numbers below
https://personal.natwest.com/personal/mortgages/secure/mortgage-overpayment-tool.html

getmore4less

It makes a tiny difference till the fix ends.

£10k overpayment on £100k @2.5% costs about £7 a year extra if the payment is reduced over not reducing the payment

exiled_red

My mortgage provider let me overpay 10% a year, when I make an overpayment the term of the mortgage isn't officially reduced, but they tell me that my minimum monthly repayment has been reduced (I could just pay this amount and have the mortgage paid off in the original term). What I do though is tell them I want to continue to keep my direct debit payments the same which means that as well as the one off over payment, I am now making a monthly overpayment which is equal to the difference between my original monthly payment and the minimum monthly payment, my term hasn't offically been reduced but if I continue to make these payments I will have paid my mortgage off early, if at some point in future I want to reduce my monthly repayments as long as I pay more than the minimum monthly amount I can do so an still pay my mortgage off by the end of the original term, which gives me a degree of flexibility if I need it.

Could this be what is happening to you? The information I get from the mortgage provider tells me about the minimum payment but doesn't say anything about overpayments so the suggestion seems to be that I should reduce may payments to this level, but I don't have to do this.

One thing to be careful of is any early repayment fees, if you are allowed to make an overpayment of 10% per year before you have to pay early repayment fees then this 10% will be made up of your one off overpayment plus any monthly overpayments you make (which in my case is the difference between the minimum payment and the payment I make).

If you have overpayed the full 10% for this year as a one off payment, repaying by making your original monthly payment amount could mean you have to pay fees so you may want to just pay the minimum payment until the repayment year ends and then revert to your larger payments for the next year (remember to include these as overpayments in calculations for any one-off overpayments you may want to make for next year).

Dird

getmore4less wrote: »

It makes a tiny difference till the fix ends.
£10k overpayment on £100k @2.5% costs about £7 a year extra if the payment is reduced over not reducing the payment

Lump the overpayments into a 3%+ interest account and OP is making money rather than losing £7

lilyp

Thanks for your replies everyone. Getmore4less I'm a bit confused by what you said. Are you able to explain it to someone with severe baby brain?

The overpayment money is already in a 3% savings account. I'm wondering if it should stay there. Our mortgage is the same rate I think.

They said that if we carried on paying the same amount it would go over the 10% threshold. It was such a farce trying to pay it off that I just gave up and said we would reduce payments but this time I'm going to be a bit firmer before we hand the cash over.

exiled_red

lilyp wrote: »

Thanks for your replies everyone. Getmore4less I'm a bit confused by what you said. Are you able to explain it to someone with severe baby brain?

The overpayment money is already in a 3% savings account. I'm wondering if it should stay there. Our mortgage is the same rate I think.

They said that if we carried on paying the same amount it would go over the 10% threshold. It was such a farce trying to pay it off that I just gave up and said we would reduce payments but this time I'm going to be a bit firmer before we hand the cash over.

I thought that might be the case, find out when the overpayment year ends and continue making the minimum payments until then (meaning you won't have to pay a fee), and when your new repayment year starts increase the monthly repayments back to what they were originally. This means that you are making a monthly overpayment of the difference between the minimum payment and what you actually pay and it will be coming from that years overpayment allowance meaning that you won't pay any fees and the 10% you have overpaid this year will mean that your mortgage is paid off early if you keep making the overpayments.

Don't force the issue regarding keeping the payments at the original level, they have actually done you a favour, if you have paid the 10% off as a single payment and had kept paying more than the minimum payment until the repayment year you would have had to pay a fee as you would have overpaid by more than 10% in this repayment year.

Thrugelmir

lilyp wrote: »

A few months ago after a lot of faffing on NatWest part we paid 10% off but they refused to reduce our term and reduced our monthly payments instead.

If your payments continued at the same level then you'd go over the 10% ceiling. As every subsequent monthly payment also contains an element of capital.

Is your mortgage currently a fixed term product?

getmore4less

lilyp wrote: »

Thanks for your replies everyone. Getmore4less I'm a bit confused by what you said. Are you able to explain it to someone with severe baby brain?

The overpayment money is already in a 3% savings account. I'm wondering if it should stay there. Our mortgage is the same rate I think.

They said that if we carried on paying the same amount it would go over the 10% threshold. It was such a farce trying to pay it off that I just gave up and said we would reduce payments but this time I'm going to be a bit firmer before we hand the cash over.

if you have a £100k mortgage @2.5% over about 20 years then you make a £10k overpayment.

the difference in interest on the £90k left over 1year is about £7 if the lender reduces the payment.

seems to be a flurry of these types of queries since martin make statements on the TV the other day

Need to seek it out and see what was said.


if you are going to have a moan a your lender it is a good idea to understand what you are moaning about.