Nationwide mortgage-what shall I do?

DesertRose

I took out a mortgage with Nationwide in 2016, for £60,000. 

Today it stands at £36,100, with £8,000 overpayment (over 7 years, I overpaid £100 a month since the start). 

It runs out in May 2026 and the interest rate is 1.49%. 

Maximum I can overpay in a year is 10%, that’s £5,940. 

It’s 33% in a shared ownership, and I am 47, net income £2,800. No dependants, £4,000 on credit card with 0% interest for 24 months. 

Savings £15,000. 

The bills, including mortgage, rent and utilities come to £1500/month. 

Now, my question is: 
I can afford to pay the whole lot off in May 2026when the cheap interest rate finishes. A combination of £5,000 overpayment for 2023-24,2024-25, 2025-26,  But that would wipe out all my savings. And probably have to pay en early redemption fee around £800. 

If I don’t make any overpayments, the balance in 2026 will stand at around £28,000, and the overpayment already in is 8,000. So £20,000?

what is best? A mortgage of £20,000 at around 5% but £20,000 in savings, or pay off the mortgage and start again with the savings? 

What would you do in my shoes? 

darkcloudi

I personally would keep savings as a buffer, mortgages are the cheapest loans you can get. If you can get an offset mortgage or a savings account that matches your mortgage rate or higher then thats a win situation.

Its difficult to say what the interest rates on savings or mortgages will be in 2026, but thats what I would do.

In my case I had my primary mortgage rate with Nationwide expired end of October, did have enough savings to pay it off but chose to keep the savings, got a rate of 4.95% (rate did drop during that month to 4.8% missed out) on the mortgage but got interest on savings paying more. Difficulty is savings interest rates can drop unless they are fixed, and after a year if  the savings are on a fix rate and the new fixed rates are lower then you can be worse off.

Continue to overpay and get that mortgage down (although some might suggest put it in savings as you should get better savings rates then 1.49%, me personally I rather overpay only due to what I suggested above as savings interest rate can drop and as 10% is the mortgage overpayment limit per year, I would make the most of it), you are on an excellent rate, won't see that rate coming back anytime soon.

chanz4

not going to rise that much, and that income be fine

DesertRose

Thank you both kindly. 

My mortgage is with Nationwide, any overpayment I make goes towards reducing the term and the amount I pay interest on. 

Last time I remortgaged, the overpayment was only taken into consideration for the term and the interest rate offered. Which is fine. But what I am trying to achieve is also lowering the amount for which I’ll have to pay a 4-5% interest rate come May 2026. As it is, I have £8000 in mortgage overpayments not earning any interest and only reducing an interest of 1.49%. 

Would I be better off using the overpayment as just straight payments (sort of taking a holiday) and saving in a high interest account what I would have otherwise paid for my mortgage?

missile

I can understand wanting to be debt free. However with 1.4% mortgage rate, it would be financially better to put that overpayment money into a savings account at 5.0+%

WYSPECIAL

Initially I’d stop over paying the mortgage and save the extra money each month. You’ll get far more saving s interest than you are paying. Nationwide currently has a regular saver at 8% that you can pay £200 per month into.

You can then review your options when the fixed rate ends.

Are you sure there is a redemption penalty once the fixed rate ends.

400ixl

As above, put the current overpayment into a savings account all the time you can get a better interest rate there.

Then review the situation in 2026.

For example if you are in a secure job and have been for a while which would mean that any redundancy would not be an issue as the payment would cover you for a while, then you could take more of a risk with a savings buffer.

I certainly wouldn't be looking at it as one or the other. You could pay off some of the mortgage and take a smaller one in 2026.

DesertRose

Thank you all. 

I think I got the wrong advice when I renewed the mortgage back in 2021. I queried if the existent overpayment would reduce the amount I owe with the new mortgage and was told no, it just reduces the term. So from 17 years it went down to 13 or something. Which is fine, of course, but those £8,000 are just reducing a tiny interest. I can’t withdraw them, they’re not earning any interest and seemingly they aren’t reducing the total amount either. It was from Nationwide to Nationwide btw, perhaps it’s different if I have a different lender next time? I’m genuinely confused. 

@WYSPECIAL the early repayment redemption penalty stands at approx £800 currently. Which would be less than the interest I’d gain in a high interest account on big chunks of overpayments. 

@400ixl I’m a senior nurse 😆
@missile I am fortunate enough to be able to keep 3 regular savers accounts going at very good rates. 

I take it from your kind advice that the best course of action is to stop the overpayments to the mortgage and put the money in higher interest accounts, then in May 2026 I can just lob a chunk at the mortgage and pay the early redemption fee. My savings would earn enough in interest to pay for that, I think. 

PenguinForever

Hey,

I have a mortgage with nationwide too. I have been told during the last month of an existing deal, you can pay off any amount from your mortgage, without any fees. I have checked this numerous times with them on the phone and they have all confirmed. Therefore, in 2026, if you pay your mortgage off in full, if you do it in the month your deal is coming to an end, you shouldn’t have to pay the £800 charge you quote. 

My mortgage deal comes to an end at the end of February and I plan to pay the mortgage off in full, even though I have 6 years left. I have phoned them numerous times to check this and each time I have been told this is correct.

Hopefully this helps you a little