Nationwide mortgage overpayments

Unicorn_cottage

Hi all
Can anyone help? I have just started a Nationwide tracker mortgage and would like to overpay on occasion. Nationwide offers 3 types of overpayment but I am unsure whether to pick "Reduce my mortgage term" or "Keep my existing mortgage payment and term the same". Does anyone understand what the differences are?

I have initially opted for "Reduce my mortgage term" thinking that that would keep my payment the same but I am unsure.


Can anyone help?

AdrianC

Simples.

If you reduce the term, the payments will stay the same, and your term will be shortened - so you'll repay earlier.

If you reduce the monthly, the payments will reduce, and the term will remain the same - you'll be borrowing less for the same amount of time.

Quite how the third option works is anybody's guess... I presume they'll simply regard your account as being in credit, so you can later miss payments without falling into arrears. Ultimately, the term will be shortened if you don't take advantage of that. The first two would change the contractual obligation of the mortgage, so you would fall into arrears straight away, rather than having that credit buffer.

eidand

I would stick to option 2. I'd keep the term as is and monthly payments go down. This gives you flexibility. Say next month you can't afford to overpay, then nothing bad happens. This gives you flexibility, to pay extra, when you can and see the results very quickly. Make sure there are no penalties for this though.

Sky_

I have a Nationwide mortgage and regardless of which option I choose, all overpayments are held in a separate 'pot' and can be used to underpay or to have payment holidays in the future, if needed (you have to contact Nationwide each time and get their agreement before changing your payments).
I usually choose the second option because it gives the greatest flexibility and none of the options make any difference to the end result or to how much interest I pay per £1000 still owed on the mortgage each day.  (N/W usually calculate interest daily.)

Niv

I currently do option 3. Basically the standard terms are not changed but essentially you still end up paying the mortgage off early, when you get to that point you just sort it with them.