Are Natwest the only lender offering a 20% yearly overpay facility?

jrawle

kwangomango said:

ElwoodBlues said:

simon_or said:

Newbie_John said:

@simon_or, what's the Barclays trick?

I couldn't explain how it works but aiui essentially payment amounts below a certain threshold don't count towards the 10% overpayment limit so you could for example make multiple overpayments of smaller amounts without touching the 10% allowance. I think that's how it works.

That's how NatWest works too - any overpayment less than 1k doesn't trigger the repayment to be recalculated. Cue lots of payments of £990 lol.

Could you explain very simply how that works, please? Why are overpayments less than £1k not considered part of the 10%?

If you overpay by less that £1000, they keep your regular monthly payment the same. If it's over £1000, they recalculate it for the next month. At least that's how it works with Nationwide, with a £500 limit. However, it doesn't mean it doesn't count towards the annual ERC limit, and I highly doubt that's the case for Barclays or Natwest, either.

fergie_

With Natwest / RBS payments of under £1000 still count toward the ERC limit. However, if you make payments over £1000, they recalculate your monthly payments immediately (ie reducing them, rather than the term).

https://www.natwest.com/mortgages/mortgage-calculators/mortgage-overpayment-tool.html

kwangomango

jrawle said:

kwangomango said:

ElwoodBlues said:

simon_or said:

Newbie_John said:

@simon_or, what's the Barclays trick?

I couldn't explain how it works but aiui essentially payment amounts below a certain threshold don't count towards the 10% overpayment limit so you could for example make multiple overpayments of smaller amounts without touching the 10% allowance. I think that's how it works.

That's how NatWest works too - any overpayment less than 1k doesn't trigger the repayment to be recalculated. Cue lots of payments of £990 lol.

Could you explain very simply how that works, please? Why are overpayments less than £1k not considered part of the 10%?

If you overpay by less that £1000, they keep your regular monthly payment the same. If it's over £1000, they recalculate it for the next month. At least that's how it works with Nationwide, with a £500 limit. However, it doesn't mean it doesn't count towards the annual ERC limit, and I highly doubt that's the case for Barclays or Natwest, either.

Cheers. The earlier post stated that these payments (for Barclays at least) didn't count towards the 10% limit. I'm guessing that's wrong?

london21

Each time it is due for a re-mortgage can also put in lump sum.

Also if interest on the mortgage so low like below 3%, can put money in a high interest paying savings account. 

Up to 4.55% easy access or up to 6.15% fixed rates

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

ElwoodBlues

kwangomango said:

jrawle said:

kwangomango said:

ElwoodBlues said:

simon_or said:

Newbie_John said:

@simon_or, what's the Barclays trick?

I couldn't explain how it works but aiui essentially payment amounts below a certain threshold don't count towards the 10% overpayment limit so you could for example make multiple overpayments of smaller amounts without touching the 10% allowance. I think that's how it works.

That's how NatWest works too - any overpayment less than 1k doesn't trigger the repayment to be recalculated. Cue lots of payments of £990 lol.

Could you explain very simply how that works, please? Why are overpayments less than £1k not considered part of the 10%?

If you overpay by less that £1000, they keep your regular monthly payment the same. If it's over £1000, they recalculate it for the next month. At least that's how it works with Nationwide, with a £500 limit. However, it doesn't mean it doesn't count towards the annual ERC limit, and I highly doubt that's the case for Barclays or Natwest, either.

Cheers. The earlier post stated that these payments (for Barclays at least) didn't count towards the 10% limit. I'm guessing that's wrong?

It's not that the overpayments don't count towards your annual limit. But if your regular repayment isn't recalculated (reduced), you get a bit of extra headroom where you can effectively overpay by more than 10% (only a bit more) without any ERCs. The overpayment is over and above your regular payment, and if that hasn't been reduced to compensate for previous overpayments, then you're effectively overpaying by a bit more. 

e.g. if your mortgage balance is 100k, and your monthly payment is £500, then you can overpay by 10k in that year. If you do overpay by that much, it should reduce your monthly repayment, for example by about £50. If you do that at the start of the overpayment year, the most you can pay in that year has reduced by £600 (12x £50). If your overpayments come in under their recalculation threshold then you're monthly repayments carry on at the original amount.

It barely matters for a 2yr fix, but for 5yrs or longer, if you want to max your overpayments, then it could be significant.

london21 said:

Each time it is due for a re-mortgage can also put in lump sum.

Also if interest on the mortgage so low like below 3%, can put money in a high interest paying savings account. 

Up to 4.55% easy access or up to 6.15% fixed rates

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Except if you want to book in a follow on fix (like many people have been doing to their advantage recently), then there's no window of opportunity to pay off the lump sum. Some lenders will apparently waive the ERC for overpayments in the last month of the current fixed term, not sure if any actually advertise that or if it's written into the mortgage terms or if its purely a discretionary thing?

Khaderbhai

First Direct have unlimited overpayments allowed as others have commented. There rates are usually competitive(ish) and have zero fees on most offerings, so makes them a good choice.

kwangomango

Except if you want to book in a follow on fix (like many people have been doing to their advantage recently), then there's no window of opportunity to pay off the lump sum. 

On that point, is it not possible to delay the follow on fix for a number of days, whereby you can pay of a lump sum penalty free having slipped into SVR? I spoke to a CS agent at Natwest who agreed this was possible but i wouldn't take that as a definitive answer.

kwangomango

ElwoodBlues said:

e.g. if your mortgage balance is 100k, and your monthly payment is £500, then you can overpay by 10k in that year. If you do overpay by that much, it should reduce your monthly repayment, for example by about £50. If you do that at the start of the overpayment year, the most you can pay in that year has reduced by £600 (12x £50). If your overpayments come in under their recalculation threshold then you're monthly repayments carry on at the original amount.

Oh i see what you are saying but don't most lenders allow you to decide if the overpayment reduces the term or the monthly repayment at the point of recalculation? If you keep the monthly repayment the same then there is no benefit to be had, right?

simon_or

kwangomango said:

jrawle said:

kwangomango said:

ElwoodBlues said:

simon_or said:

Newbie_John said:

@simon_or, what's the Barclays trick?

I couldn't explain how it works but aiui essentially payment amounts below a certain threshold don't count towards the 10% overpayment limit so you could for example make multiple overpayments of smaller amounts without touching the 10% allowance. I think that's how it works.

That's how NatWest works too - any overpayment less than 1k doesn't trigger the repayment to be recalculated. Cue lots of payments of £990 lol.

Could you explain very simply how that works, please? Why are overpayments less than £1k not considered part of the 10%?

If you overpay by less that £1000, they keep your regular monthly payment the same. If it's over £1000, they recalculate it for the next month. At least that's how it works with Nationwide, with a £500 limit. However, it doesn't mean it doesn't count towards the annual ERC limit, and I highly doubt that's the case for Barclays or Natwest, either.

Cheers. The earlier post stated that these payments (for Barclays at least) didn't count towards the 10% limit. I'm guessing that's wrong?

I've found the thread that discusses this.

https://forums.moneysavingexpert.com/discussion/6344494/overpayments-on-barclays-mortgage
https://www.reddit.com/r/UKPersonalFinance/comments/e2e50j/barclays_mortgage_overpayments_does_this_sound/

What it looks like with Barclays is as follows -

Overpayments that are more than 3x the monthly payment count as a capital repayment and count towards the annual 10% limit.

Overpayments that are less than 3x ordinary monthly payment per transaction go into an overpayment reserve and does not count towards the annual 10% limit.

In both of the above cases, the interest charged takes into account the overpayments made, so you get the saving you expect from an overpayment.

So if your normal monthly payment was £1,000, you could make 5 individual overpayments of (say) £2,999 every day from Monday to Friday without touching the 10% limit or impacting your monthly payments but still getting the benefit of the overpayment.

I know it sounds too good to be true but apparently that's how it is!

jrawle

kwangomango said:

ElwoodBlues said:

e.g. if your mortgage balance is 100k, and your monthly payment is £500, then you can overpay by 10k in that year. If you do overpay by that much, it should reduce your monthly repayment, for example by about £50. If you do that at the start of the overpayment year, the most you can pay in that year has reduced by £600 (12x £50). If your overpayments come in under their recalculation threshold then you're monthly repayments carry on at the original amount.

Oh i see what you are saying but don't most lenders allow you to decide if the overpayment reduces the term or the monthly repayment at the point of recalculation? If you keep the monthly repayment the same then there is no benefit to be had, right?

The interest is usually calculated daily, so as soon as you make an overpayment, you are paying less interest. If you then keep the monthly payment the same, more of that payment will be going towards repaying the capital than if you hadn't overpaid.