Mortgage Overpayment charges

hawkinm

I want to make a one off overpayment to my Natwest mortgage to reduce the term of the mortgage. The payment is within their rules for overpayment. I am told that I must go through an affordability check which will take approximately 2 hours and cost me £35. This is presumeably similar to the affordability checks that were done by the mortgage adviser when the mortgage was first taken out. Is this normal.

[Deleted User]

Most people would just make the overpayment and leave the term as it is.

BakingC

Doesn't sound normal. Are you sure they understood that you want to make an overpayment, keep the monthly payment the same and as such the mortgage term reduces as the capital has reduced faster than without the overpayment? Rather than thinking you want to reduce the term of your mortgage which would understandably involve affordability checks etc.

KnowledgeIsLife

May be a misunderstanding I can only see you needing to do an application is if you were requesting to reduce term without a capital repayment phone them back and double check NatWest may be different but doesn't seem right I deal with capital repayments and that's not how we work

Thrugelmir

Don't reduce the term. Then the lender doesn't have to perform an affordability check. The check is a consequence of the Mortgage Market Review (MMR) a few years back. Which placed a duty of care on lenders.

KnowledgeIsLife

I don't agree to the above I work for a major high street bank and there is two ways to reduce your term either via making a capital repayment this would not require an application as you will be reducing the balance from say 100k to 80k your payments will stay the same but you will be paying more capital and less interest because it is over a shorter period of time.

If you were to do it without a capital repayment then yes you will be subject to application as what you will be doing is reducing your term with the same balance which would In turn be making your payments higher hense why they would have to check affordability.

Hope this helps phone your lender let us know how you get on.

Thrugelmir

KnowledgeIsLife wrote: »

I don't agree to the above

As an example. The Nationwide.

You can apply to extend or reduce your mortgage term at any time, provided you meet certain eligibility criteria. We may carry out affordability assessments as part of your application, depending on whether you're applying to reduce or extend your term and your proposed retirement age.

With interest rates potentially to rise in the future. Borrowers could underestimate the impact on their monthly outgoings.

What level of interest rates does your employer currently use to assess affordability?

KnowledgeIsLife

Yes but you are missing that he is doing it via a capital repayment which will not require an application as it will not affect his affordability as his mortgage payments should not increase

KnowledgeIsLife

NatWest do not actually allow you to reduce your term as part of an overpayment which may be where some confusion is your only option is to reduce your payments what you may be able to do (check with NatWest) is make your lump sum and allow your payments to reduce and then set up a standing order or a regular overpayment to make sure you keep paying the same amount you were before although this will not show a reduction in term on paper you will indeed pay your mortgage offer sooner hope this helps in some way apologies I did not realise NatWest did not give the option to reduce term which I find strange myself.

Thrugelmir

KnowledgeIsLife wrote: »

as it will not affect his affordability as his mortgage payments should not increase

Then I have to refer you back to my post #7.

Nor did you answer my question.

KnowledgeIsLife

I don't see how quoting nationwide information is relevant when he has a mortgage with NatWest? Anyway NatWest don't allow you to reduce the term when making a capital repayment unfortunately but depending on his actual mortgage and how much he can overpay my last comment would do the trick.