mortgage reserve , is this the best way to do it ?

E@J'S_DAD · 29 May 2006 at 12:57PM

Hi
Ihave a mortgage with UCB Homeloans .fixed for another 3 years 81,000 5.99 apr.

I have been reading other threads about how overpayments work, and they mention overpayments reducing payments or capital/term.I undersand my repayments cant reduce payments as they are fixed.

Any overpayments i make go into a seperate reserve but do not appear to make any difference to my actual mortgage balance,this money seems to just sit there earning ucb interest but not actually doing anything for me ,is there a better way of using this to clear the mortgage,i am allowed to overpay 500 a month with no penalty , but i do not see the point if its not actually working for me.

would i be better off saving the money and waiting untill i have enough to pay the whole mortgage off whilst earning myself some interest.

Am i right in this ?

many thanks.

alanobrien · 29 May 2006 at 3:17PM

I suspect this depends on who you are with.

I took out a fixed rate mortgage with Nationwide 18 months ago. We recently started to overpay and they automatically reduced my monthly payments to reflect what i had over payed.

It was quite some effort to get them to sort themselves out to ensure my mortgage term was reduced rather than the payments (our preferance reducing the term from 22 to 11 years

).

In fact it took 6 emails and 2 phone calls but fingers crossed it looks like they have it sorted now.

savingpennies · 29 May 2006 at 3:23PM

I think I would be ringing them up and asking them how, if they allow you to overpay, it actually makes a difference. Is the mortgage based on annual interest? If so it might mean that the overpayment won't have any effect until the end of the year. If it does just sit there with no benefit to you then I would be sticking my £500 somewhere were it would be earning me interest - a cash ISA for instance until I could find a way of using it to reduce the mortgage.

Joe_Bloggs · 29 May 2006 at 3:40PM

As savingpennies says.
I just realised that UCB homeloans are a 'specialist' lender of the Nationwide. Perhaps the best thing for the original poster is to ask UCB what happens to overpayments and when do these payments have any influence ? Try and find out what early repayment penalties exist.
J_B.

Miss_Penny_Pincher_2 · 29 May 2006 at 4:38PM

alanobrien wrote:

I took out a fixed rate mortgage with Nationwide 18 months ago. We recently started to overpay and they automatically reduced my monthly payments to reflect what i had over payed.

It was quite some effort to get them to sort themselves out to ensure my mortgage term was reduced rather than the payments (our preferance reducing the term from 22 to 11 years ).

In fact it took 6 emails and 2 phone calls but fingers crossed it looks like they have it sorted now.

Sounds like you had quite a bit of hassle with Nationwide - we have just made our first 2 overpayments to Nationwide and they originally used it to reduce the monthly payments - I phoned them to say actually I want to reduce the term instead. They said this was no problem - I hope they have sorted it out correctly!!

mortgage reserve , is this the best way to do it ?

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