Over paying hte mortgage help!

[Danm1les]

Hi,

Little bit of help need from people in the know

2 years ago I purchased my first flat on a 4 year fixed mortgage from Nationwide over 25 years, and then a year ago I sold that to buy a house. As I was only 1 year into my 4 fixed I took out a 2nd 3 year fixed mortgage and had to move to a 35 year mortgage due to the amount the bank would lend us, this was sorted all via our mortgage adviser eventually!

So as it stands we have two mortgages, one for around 105 and the other for just under 90, both a re fixed for the next 3 years, and both are 35 years long. Now me and the Mrs are both good at saving and not wasting much whilst still having a good life, and currently I have around £15k in the bank that I could put against the mortgage and could also over pay the mortgage by about £1k a month.

But would this be worthwhile to do this month by month as the mortgage is over 35 years? Or should I just over pay a chunk at the end of the 3 year fixed, when we will more than likely get a new mortgage over 25 years?

Hopefully that makes sense, and sorry for the essay!

[Sarnie]

If you are going to pay the full £15k then the sooner the better.......you may want to speak to them about you ERC's though as a £15k payment plus £1k a month is likely to trip your 10% overpayment allowance fairly quickly.....

[Danm1les]

Sarnie said:

If you are going to pay the full £15k then the sooner the better.......you may want to speak to them about you ERC's though as a £15k payment plus £1k a month is likely to trip your 10% overpayment allowance fairly quickly.....

Ok perfect, I assume I could over pay each mortgage to the 10% threshold though? I'll try and fire them over an email and see what they say. Do you think overpaying that amount would actually bring the payment down a notable amount?

[Sarnie]

Danm1les said:

Ok perfect, I assume I could over pay each mortgage to the 10% threshold though? I'll try and fire them over an email and see what they say. Do you think overpaying that amount would actually bring the payment down a notable amount?

It won't bring the payment down a great deal but the amount payable in interest over the term will take a fairly big drop........

[Burgmeister]

If you make an over-payment they will apply this to the capital balance therefore reducing any interest liability by this value. Your overall monthly payment(s) will remain static though and will not reduce unless Nationwide recalculates your account...this can happen for a number of reasons, usually transactional, and so if you make your over-payment now your monthly payments will drop at the expiry of your deal period as at that point you'll either revert to their SVR or will take out another deal...it is unlikely there will be any need to recalculate your monthly payment before this.

What that means though is that once you have made your over-payment any monthly payments thereafter will become over-payments because you'll have reduced the interest bearing balance.

[Ozzie Osmond]

Just an observation - if you have the financial flexibility which is apparent from your post I, personally, wouldn't "fix". As with all forms of insurance "fixing" has, on average, a cost attached to it. Amongst other things, once you get away from the "fix" contract the bank can't stop you repaying as much as you like whenever you like.

As regards your current position I would talk to the mortgage company and see how they treat a lump sum repayment and/or monthly overpayments. And get that £15k repaid a.s.a.p.