Beware Nat West 30 July 2019 at 3:52PM in Mortgage-free wannabe 3 replies 627 views

Kerriech

We took out a 7 yr mortgage with 5 yr fixed rate with Nat West. This mortgage has a 10% of balance PA overpayment facility.
We borrowed £150,000 allowing us to over pay by £15,000 in the first year. The plan was to overpay the max to be mortgage free soon after the fixed term was over.
When the mortgage completed, the balance of our previous mortgage was around £5000 less than I had anticipated. When this overborrow was paid into my account I immediately paid it into the mortgage.
I was told over the phone that overpayments in excess of £1k would reduce monthly payment unless I requested otherwise. Which I did.
This resulted in my monthly payments reducing by £64. When they reinstated my contracted monthly payment this included an “overpayment” of £64 pcm.
This in effect reduces my ability to overpay by £768 a year, and £3840 over the 5 year fixed term. So my £5k overpayment will only result in reducing the balance by £1160.
This is not how any mortgage I have ever had before has worked.
I have complained to the ombudsman who appears to think it was my responsibility to ask how they would apply an overpayment.
So we’re now stuck with a 5 year mortgage which we can’t overpay. Really angry.
So beware of Nat West.

FIREdoc

Agree, they do not make this clear at all. I think the best way is to pay everything as a regular overpayment i.e. Have them split your annual repayment allowance over the 12 months, and then make sure you change the amount every 12 months. I'm not 100% sure this gets around it, but when I spoke to them on the phone, it seemed like it might.

NorthernMonkey1

Your 5k overpayment has reduced the balance by 5k, not 1164.

Each year you can overpay by 10%, and although the amount you can overpay by is reduced by £768 a year, you can still overpay by the new balance (around £140,000) times 10% minus £768, so about £13250.

It doesn't seem in the least bit unusual

FIREdoc

My understanding of it was that it reduced the balance today by 5000, but because they recalculate (i.e. reduce) the regular payment, the impact over the 5 years is much less. This is only an issue if you are hitting the full 10% overpayment though, as if you're not, you can simply add a monthly overpayment to keep the amount going out each month the same. But if you'v paid the full 10%, then the monthly "overpayment" to take you back up to the original amount would count to natwest as an EXTRA overpayment above the 10% allowed. Despite it only keeping your month payment the same.