Overpaying mortgage

Letsgetmoving

We have just moved to a new house and have a 5 year fixed, 25 year mortgage. I plan to overpay £140 p/m as this brings the term down to 20 years and overall was cheaper than the 20 year option.

the Nationwide website says;

We'll reduce your minimum monthly payments at the next natural recalculation point, such as an interest rate change or product expiry.

For single overpayments of £500 or more

We'll automatically reduce your minimum monthly payments the following month.

So if I pay £140 per month will it not do anything until the 5 years are up?

Two alternatives

- pay £560 every 5 months and it apples each time

- put £140 p/m in a savings account and pay it off in a lump when we remortgage. Mortgage is 4.09% would we get a better savings rate?

Thanks!

Letsgetmoving

Sorry the first option from the website was for under £500

Sncjw

You can select to choose to reduce term with overpayments. 

jrawle

If you overpay by less than £500, your automatic, monthly direct debit payment will not reduce and the term on paper will stay the same. However, the interest is calculated daily, so you will immediately be paying less interest. Once your five year term is up, you can choose a new deal over a term of 15 years (or any term you choose).

As for saving vs overpayments, you will struggle to beat your mortgage rate with an account you can make regular savings into each month. If you already have a lump sum in the bank that you are making the overpayments from, you could find a fixed term bond with a higher rate than the mortgage.