Mortgage Overpayment Confusion - NatWest

SandyDorne

I recently made a lump sum overpayment from my savings on my NatWest mortgage. I was told by the customer advisor that by making my maximum 10% overpayment that my monthly payments would reduce.  I queried this as I was wanting to reduce the term of my mortgage and keep my monthly payments the same but was told that NatWest take into account my monthly repayments as part of my 10% overpayment allowance.  I am confused as I thought that your overpayment allowance was just that. Can anyone advise me please as my monthly payments are set to reduce by £200 per month? Further update: I have called and spoken to another advisor who has told me that if I want to revert to my original payments, I can as long as I meet with their advisor and go through a reapplication process by providing three months pay slips and going through the mortgage offer to reduce the term am pay them a fee.  I already paid £999 for my existing mortgage to them in 2020. This seems to be a rather costly exercise to reduce the term just because I have put some of my savings towards the overall mortgage? Is this right?

getmore4less

This comes up a lot,  it is lender dependant how they treat the overpayments and any limits.

Some will allow the payments to stay the same some won't or have criteria that trigger the recalculation.

Barclays appears to be the most generous on their interpretaion of 10% as they allow both regular trhat don't count  and lump sums that do

other lenders are less accommodating and over pay we recalculate.

In most cases the option of reduce payment or reduce term is actually reduce payment or keep payment the same, the contractual term never changes.

The impact of the reduced payment is often not a lot as you can overpay again in 12months or less anyway.

as an example
£200k mortgage over 20y  2.5% and a 10% overpayment keeping the payment the same 1st year

amount	rate	payment	owing	interest
£200,000.00	2.50%	£1,059.81	£192,193.28	£4,910.95
£180,000.00	2.50%	£1,059.81	£171,687.51	£4,405.18

now recalculate the payment

amount	rate	payment	owing	interest
£180,000.00	2.50%	£953.83	£172,973.95	£4,419.86

This is ~£106 reduction in payment (1/2 yours)  but the extra interest the 1st year is  £15.

Stick that £100pm in a regular save you can get the £15 back

johnny_c-l

I was looking into overpaying a NatWest mortgage and have read a few threads like this. 

I used NatWest's live chat to clarify when they recalculate overpayments and was told it was when an individual overpayment is £1k+. I pressed them on this and was told you could make multiple payments of £999 and it would not trigger recalculation of the monthly payment. 

Depending on how much you're overpaying by you could drip feed it in £999 chunks over a few weeks which could get the outcome you wanted.

SandyDorne

Thank you for that insight Johnny_c-1, that is most interesting they did not advise me of that when I made my 10% overpayment but I am looking forward to saving on the monthly interest.  Given the minimal impact reducing the term has I think that my best course of action is to continue with my overpayment each year and save the £200 or so pounds each month and put it towards  clearing the mortgage at the end of the final year when my 5 year deal has ended.  It is just so frustrating to get different responses from them depending on who you speak to.  It feels like no one is really sure of the process but you hope that someone along the line someone is as they are being given large amounts of my money over an awfully long period of time!