Natonwide overpayment question

Tarama

Hello 

I am unsure if there is anyway to overcome this, but any thoughts on this would be welcome. 

Due to taking on a mortgage solely, a £22K overpayment was made last week to reach affordability.  I spoke to someone in Nationwide and was advised I could choose to keep my mortgage payment the same and also to choose to reduce the mortgage term.  Thus, I did this on the mortgage manager, but I phoned Nationwide today to check the status of this.

The person I spoke to told me it was not possible to reduce the term and the mortgage payment would instead reduce due to the payment made.    They said as this payment was made due to affordability not overpayment, I was not able to reduce the mortgage term with this £22K.

Would anyone have any thoughts about any other arguments I could use to appeal to NW, to reduce the term using this payment.

Many thanks Tarama     

Hoenir

You could simply overpay every month. 

The lump sum you've paid appears to do little more than reduce the borrowing to the amount the NW will advance on your sole salary on a given term.

Shortening the term and increasing the contractual payments is the affordability issue. Lenders have a regulatory duty of care now.  For lenders it's safety first. In an era of blame culture where when things go wrong it's someone elses fault. 

Tarama

Hoenir said:

You could simply overpay every month. 

The lump sum you've paid appears to do little more than reduce the borrowing to the amount the NW will advance on your sole salary on a given term.

Shortening the term and increasing the contractual payments is the affordability issue. Lenders have a regulatory duty of care now.  For lenders it's safety first. In an era of blame culture where when things go wrong it's someone elses fault. 

Hello Hoenir 

Thank you for this.  My question is not about blaming anyone, but simply to see if anyone knows any way that the sum paid could be used to reduce the term as well as create affordability.

Tarama   

grumpy_codger

Tarama said:
Due to taking on a mortgage solely, a £22K overpayment was made last week to reach affordability. ...

Tarama said:

Hoenir said:

You could simply overpay every month. 

The lump sum you've paid appears to do little more than reduce the borrowing to the amount the NW will advance on your sole salary on a given term.

Shortening the term and increasing the contractual payments is the affordability issue. Lenders have a regulatory duty of care now.  For lenders it's safety first. In an era of blame culture where when things go wrong it's someone elses fault. 

...My question... simply to see if anyone knows any way that the sum paid could be used to reduce the term as well as create affordability.

I don't understand what you mean by "reach/create affordability".

Affordability means ability to borrow more. What's the point in overpaying and borrowing more?

With regard to reducing the term, this means higher monthly payments. Just keep overpaying and the term will get shorter naturally, especially if the overpayment limit is determined by the principal, not the current mortgage balance.

Yorkie1

As others have said, reducing the term means higher contractual payments for the remainder of the shortened term. The lender needs to be satisfied that you can afford those repayments at current and notional interest rates. It sounds as though you had to make an overpayment to bring yourself within NW's criteria, and by shortening the term you'd be taking yourself back outside them again - hence them saying No.

Also as others have said, you can achieve exactly the same result of ending your mortgage sooner, by making overpayments each month which would equate to what your higher contractual payment would have been if the term was shortened.

This also gives you the flexibiility that if you have an unexpected bill, or circumstances change, you can reduce your overpayment if necessary to deal with it - whereas you wouldn't be able to do that if you had a shortened term and a higher contractual payment.

Tarama

grumpy_codger said:

Tarama said:
Due to taking on a mortgage solely, a £22K overpayment was made last week to reach affordability. ...

Tarama said:

Hoenir said:

You could simply overpay every month. 

The lump sum you've paid appears to do little more than reduce the borrowing to the amount the NW will advance on your sole salary on a given term.

Shortening the term and increasing the contractual payments is the affordability issue. Lenders have a regulatory duty of care now.  For lenders it's safety first. In an era of blame culture where when things go wrong it's someone elses fault. 

...My question... simply to see if anyone knows any way that the sum paid could be used to reduce the term as well as create affordability.

I don't understand what you mean by "reach/create affordability".

Affordability means ability to borrow more. What's the point in overpaying and borrowing more?

With regard to reducing the term, this means higher monthly payments. Just keep overpaying and the term will get shorter naturally, especially if the overpayment limit is determined by the principal, not the current mortgage balance.

Thank you for your reply

I have not made the issue clear.  Due to  a relationship breakdown, I solely took on the mortgage.  So NW worked out my affordability and fortunately I was able to afford to pay the £22K - the figure they arrived at to ensure the mortgage payments were affordable for me. 

My question was does anyone have any experience in this specific situation whereby NW allowed them to reduce the mortgage term, using this sum.  The prime purpose was to ensure affordability of course.

From the responses (and thank you everyone), it would appear this is not the case.

I understand about overpayment going forward.

Regards Tarama   

grumpy_codger

I'm no expert and don't have any experience in this, but affordability is normally assessed in terms of (affordability of) monthly payments.
So, if the lump sum payment reduces the term, the monthly payments remain the same, that defets the purpose of this lump sum payment (to reach affordability - i.e. to reduce monthly payments). 
In your case "to reduce the term as well as create affordability" are conflicting objectives achievable only if the lump sum is bigger than required for affordability alone.

ballisticbrian

I don't know about the affordability issue, but when choosing a fix with Nationwide, I had to specifically look for one that allowed overpayments to shorten the term. They don't all allow this. Even then there were other rules such as: the overpayment could not be more than 10% of the remaining amount, in that fix term.

Then, I was able to switch between reducing the term or reducing the payments online, prior to making the payment, online.

Only giving how it was in my experience.

Tarama

ballisticbrian said:

I don't know about the affordability issue, but when choosing a fix with Nationwide, I had to specifically look for one that allowed overpayments to shorten the term. They don't all allow this. Even then there were other rules such as: the overpayment could not be more than 10% of the remaining amount, in that fix term.

Then, I was able to switch between reducing the term or reducing the payments online, prior to making the payment, online.

Only giving how it was in my experience.

Hello Ballisticbrian

thank you for sharing your experiences.  I can make up to 10% overpayment of the full amount borrowed, annually.