How to reduce my term, not my monthly repayments?

Manchester2024

I have a mortgage with NatWest for 25 years. When I’ve tried to do an overpayment, it recalculates my monthly repayments instead of reducing my term. Does anyone have an idea how I do it so that it reduces my term instead please? Thanks! 

Hoenir

Reducing the term end date is a contractual change. You'll need to apply to do this. NatWest are obliged to conduct affordability checks now. Alternatively simply continue to overpay .

Mark_d

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Manchester2024

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

Hoenir

What mortgage product do you currently have? 

Manchester2024

Hoenir said:

What mortgage product do you currently have? 

5 year fixed with NatWest that started in November last year, at 4%. I can overpay 20% each year if I wanted to.

kimwp

Ask them for overpayments to reduce the term instead of reducing monthly repayments. It (used to be at least) a matter of changing a setting in your account.

jackieblack

Manchester2024 said:

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

That article specifically says:
“Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.”

If you continue to make overpayments, the current mortgage term will be reduced ‘naturally’ (at some point the overpayments will total the remaining mortgage balance and the mortgage will be repaid) while leaving the flexibility to cease/reduce the overpayments if necessary in the future.

Manchester2024

jackieblack said:

Manchester2024 said:

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

That article specifically says:
“Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.”

If you continue to make overpayments, the current mortgage term will be reduced ‘naturally’ (at some point the overpayments will total the remaining mortgage balance and the mortgage will be repaid) while leaving the flexibility to cease/reduce the overpayments if necessary in the future.

What confuses me though is that it also says:

“If your mortgage provider alters your repayments to keep the term the same, although it will boost your monthly disposable income, you won't save on your interest payments, and the lender will earn more. So be sure to tell it to keep your monthly repayments fixed.”

kimwp

jackieblack said:

Manchester2024 said:

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

That article specifically says:
“Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.”

If you continue to make overpayments, the current mortgage term will be reduced ‘naturally’ (at some point the overpayments will total the remaining mortgage balance and the mortgage will be repaid) while leaving the flexibility to cease/reduce the overpayments if necessary in the future.

Two paragraphs down from your quote:

"If your mortgage provider alters your repayments to keep the term the same, although it will boost your monthly disposable income, you won't save on your interest payments, and the lender will earn more. So be sure to tell it to keep your monthly repayments fixed."

There's a difference between:
-Applying for a term reduction - change of contract, requires credit search
- making overpayments within the current contract terms

And then again within overpaying within contract terms, the overpayment: 
- reducing the monthly payments (usually the default as it favours the lender)
- reducing the term by keeping monthly payments the same <<<<<< I believe this is what the OP is (correctly) trying to do

<>>>>> Achieved by calling them and asking for all overpayments to reduce the term/not cause recalculation of the monthly payment (including the one you already made)

jackieblack

Manchester2024 said:

jackieblack said:

Manchester2024 said:

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

That article specifically says:
“Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.”

If you continue to make overpayments, the current mortgage term will be reduced ‘naturally’ (at some point the overpayments will total the remaining mortgage balance and the mortgage will be repaid) while leaving the flexibility to cease/reduce the overpayments if necessary in the future.

What confuses me though is that it also says:

“If your mortgage provider alters your repayments to keep the term the same, although it will boost your monthly disposable income, you won't save on your interest payments, and the lender will earn more. So be sure to tell it to keep your monthly repayments fixed.”

Yes, if the lender reduces the required monthly payment, you need to continue to pay the higher amount.

So for example (just using simple numbers for ease), if the monthly payment requested by the lender is £500, but the borrower makes an overpayment and the lender recalculates the new monthly payment to be £450, if the borrower continues paying £500 each month that will be an additional £600 per year overpayment and over time all those £600s will add up to equal the outstanding balance a few years earlier than the mortgage would be paid off if the borrower had only paid the reduced payment.

(I know it’s a bit more complicated with changing interest rates etc, but the principle is the same)