Nationwide OP preferences. Bafflement.

chucky17

Hello, everyone.

I'm a long-time user of the forums but this is my first post, so please be kind!

Essentially, I'm in the fortunate position to overpay my mortgage with Nationwide at the moment (we are first-time buyers with a 5 year fixed term mortgage that we took out in 2015). However, I am confused -- very confused -- by the three "overpayment preferences" on their website, which are as follows:

Pay off my mortgage earlier by reducing my mortgage term

Reduce my future monthly payments

Keep my existing payment and term as-is. (At the next natural mortgage payment change, i.e. interest rate change, my payment will be automatically recalculated).

Now, I know that I don't want to reduce my future monthly payments. What I want to do is pay my mortgage off earlier by overpaying, whilst retaining the freedom in the future to go back, if needs be, to paying the lower amount originally agreed between ourselves and Nationwide. In other words, I don't want to formally / contractually reduce the mortgage term -- but the first option seems like it might be suggesting just that.

I've done a search of the forums and it's clear that this is an issue that lots of other people have had! However, there seem to have been conflicting and contradictory viewpoints from forum members. I should also point out that I've contacted Nationwide, but that their response left me none the wiser as to whether to pick OP preference 1 or OP preference 3.

Is anyone able to weigh in decisively on this?

omelette451

Yes, I did exactly this with Nationwide too. Just tell them (on the phone was fine and easy, the web form didn't work for me) you don't want your payment to go down/be recalculated and they'll sort the rest. After that my payment has essentially been fixed but I can change it to the original payment (or anything over that) at any time by calling back.

Incidentally in the confirmation letter they were keen to stress that the payment would stay fixed unless or until the bank rate rose (I'm on a tracker) to a level that the DD wouldn't cover it, at which point it would be increased, which confirms I think the reasoning the OP wants.

rtho782

Let's say you have a £100k mortgage, and your monthly payments are £1000 a month.

Let's pretend half of that is interest, because otherwise this gets complex.

So your capital is reducing by £500 a month and the whole mortgage is 200 months long.

If you overpay £25k today, your capital is £75k, the term reduces to 150 months, but you are not contracted to pay more than £1k a month, it's just that those same payments will have it gone quicker.

Let's say you increase your monthly payments to £2k, you keep that up for 10 months, this effectively reduces your term by 20 months, but you're not contracted to keep paying £2k.

marblecake

My Nationwide mortgages are set to the first option (reduce the term and don't change the payment). When I make an overpayment of £500+, I get a letter saying that the term has reduced as a result. My monthly payments have stayed the same throughout (apart from when the interest rate changes) and I can overpay or not as I choose. I do this manually using online banking. I can go back to just making the monthly payments I agreed to at any point (with no overpayments). I've reduced one of my mortgages from around 17 years to 2.5 years by doing this. If I stop making overpayments now and go back to just paying my regular monthly amount, I will pay it off in 2.5 years. They won't make me keep up a higher amount than was originally agreed if I do this. Does that help?


Please check how much you are allowed to overpay each month though. On my 5-year fixed Nationwide mortgage, I can only overpay £500 each month or I incur fees. On my variable ones, I can overpay as much as I want.

ThePants999

chucky17 wrote: »

Now, I know that I don't want to reduce my future monthly payments. What I want to do is pay my mortgage off earlier by overpaying, whilst retaining the freedom in the future to go back, if needs be, to paying the lower amount originally agreed between ourselves and Nationwide. In other words, I don't want to formally / contractually reduce the mortgage term -- but the first option seems like it might be suggesting just that.

Yup, that's the first option - "Pay off my mortgage earlier by reducing my mortgage term".

You can look at a mortgage in two different ways.
- The mortgage is X. With monthly repayments of Y, it will take Z months to repay the mortgage.
- The mortgage is X. With a term of Z months, you need to pay Y per month.
Those are exactly the same thing - just different perspectives on how Y and Z relate to X.

You're reducing X by overpaying. That can change Y and leave Z the same, or it can change Z and leave Y the same. You're looking to do the latter. Leave the monthly repayment unchanged, in which case you'll naturally pay off the mortgage faster than previously planned by making the same payments you always made.

Option 3 is basically the same thing as option 2, except it says "not yet" - it says "leave my payments alone for now, but the next time my payments would change for another reason, like a change in interest rate, also recalculate them to retain the original mortgage term despite my overpayments" - weird. Not what you're looking for.

chucky17

Thanks for your replies, everyone. Seems like the first option is the one that I want!

Elfbert

Sorry to throw the cat amongst the pigeon here, but I think you want option 3

(Option 3 is what I've always done with Nationwide)

You want to put in that extra money, but never be tied in to putting in the extra.

So whilst times are good, you want to overpay. But you don't want to have to overpay if things change.

Say your mate loaned you £100, and you will pay him back at £1 a week.
Option 1 - you happen to pay him back £20 the first week. He gives you 80 weeks to pay the rest back, instead of 100 weeks.
Option 2 - You happen to pay him back £20 the first week. You then pay 80p a week for a further 99 weeks to pay him off.
Option 3 - You pay him back £20 the first week, you still have 99 more weeks to pay him back, but if you manage to keep to the agreement of £1 a week, you pay him back 19 weeks early. If, on the other hand, you're short one week, you MIGHT be able to negotiate with him to miss a week, as you're already 19 weeks 'ahead' with the payment. (You need to check with your mate on that though!! )

Option 3 gives you the greatest flexibility. When your 5 yr fix is up, you can choose what to do - reduce your term, reduce your payments, or what I did - move house and borrow more! You are basically delaying the decision and waiting to see what will suit you the best.

chucky17

Hi Elfbert. Thanks for your reply. If this proves anything, then I suppose it is that Nationwide could explain this a lot more clearly than they currently do! (There are threads on this subject dating back several years, and in that time they have not changed the language used to explain the three options, despite the evident confusion.)

Having contacted Nationwide again, though, it does seem as if choosing the first option does not entail a "de jure" / contractual reduction in the mortgage term, which is what I was worried about. Hopefully, that clears things up -- slightly! -- for anyone who stumbles upon this thread in future.

TheShape

Although this thread seems to have come to a close I'll jump in to second Elfberts opinion that option 3 appears to be the option that suits the OP best as it both effectively reduces your mortgage term and allows the flexibility to return to the original payment. If rates do change in future and they recalculate your payments, you can just review and that point and either keep overpaying or revert to the contracted payment.

ThePants999

I don't see why anyone would think that option 1 ties you into the OVERpayment. It just leaves you tied to the ORIGINAL payment amount. You're never tied into a higher payment than you originally signed up to unless the interest rate increases.