Overpaying on my Natwest Mortage

georged123

I'm currently 12 months in to a 5 year fix at 4.5% with roughly £190k left to pay over 29 years.

I want to overpay this year as I don't think interest on my savings is going to better the rate of my mortgage.

I don't want to reduce my monthly payments but I've read that if you overpay more than £1,000 it automatically reduces your monthly payments instead of just reducing the outstanding balance and keep the same monthly payments?

Altior

What are your options?

One-off overpayment

• This is an additional payment that you can make at any time.
• You can make one-off overpayments as often as you like, but if you exceed your overpayment allowance, you’ll have to pay an Early Repayment Charge (ERC) on the amount over 20%.   
• Your one-off overpayment will always reduce your balance. 
• You may be eligible to use your one-off overpayment to reduce your remaining term, or you could choose to change your monthly contractual payment.  You can view your overpayment choices within ‘Manage your Mortgage’.

Appears that you have the choice with your lender.

Nasquerns

Most lenders let you choose whether the overpayment reduces the term or the monthly payment, so it’s worth calling them to set it the way you want. Personally I’d keep payments the same and just shorten the term.

Angelica123

Have you actually logged into your mortgage account and seen what overpayment options are available?

NatWest says you can pay up to 20% of mortgage without facing ERPC, and that you can choose whether to reduce monthly payments or reduce term. Where are you getting £1000 from?

georged123

https://forums.moneysavingexpert.com/discussion/comment/81912474#Comment_81912474

Other people in threads on here and other places have said that they have tried to overpay more than £1000 and been made to take reduce payments anyway despite selecting to reduce the term.

I've seen conflicting information.

Newbie_John

There is literally little difference between reducing monthly payments and not.

Natiownide gives you 10% overpayment limit a year so let's say you overpay £1000 in 1st month and the reduced monthly payment by £100 then overpay £1100 next month and so on. If at some point you hit the yearly limit you can then save the difference and overpay unlimited amount at the end of your fixed term.

Or you can switch to more generous provider like First Direct etc.

Altior

But what people are doing when shortening the term is postponing the value of their overpayment to the end of the mortgage. ie when the £ has the least purchasing power. By reducing the monthly payments, you are realising the value now.

If your payment pm is £600 and you reduce the term, the payment next month is still £600. No tangible difference to your finances. However, by applying the full op to the monthly, you might reduce it to £540. You now have £60 pm extra. Could be invested, put in pension, saved, spent on furniture, whatever.

I can never see the value in shortening the term, myself. Yes the total interest will be less but not when it counts most.

Unless there is a specific objective in clearing the mortgage earlier.

georged123

https://forums.moneysavingexpert.com/discussion/comment/81912639#Comment_81912639

Thanks, that's an interesting way of looking at it that I hadn't considered before.

lovemula21

NatWest changed how they handle overpayments a few months ago. Now you are given the option to reduce the term or the monthly re payments. It can all be done via their app.

Nasquerns

You might want to check with NatWest first - some lenders let you choose whether overpayments reduce the term or the monthly payment. If it were me, I’d ask them to apply it to the term so the balance drops faster.

RedFraggle

You can do more than £1000 just not in one lump. I do a £900 then a £100 the next day.