NatWest mortgage regular overpayment confusion
Discussion
I'm 1 year in to my 5 year fixed interest period. This is mine and my OH's first mortgage, so we cautiously opted for a 30 year term to keep repayments low and overpay when we were comfortable or wait until remortgage time. After us both getting promoted shortly after moving in, we've both been earning substantially more and bought all of the main expensive furniture/appliances etc so we're confident that we can comfortably overpay...
So, this morning I logged in to the mortgage account and found the below:
I would've preferred to ask NatWest directly but it's seemingly impossible to get through to someone on live chat/phone during the working day, so I thought I'd post here as I'm well aware there are knowledgable folk on here who may be able to help, or at least arm me with some queries I should raise with NatWest when I eventually get through!
So, this morning I logged in to the mortgage account and found the below:
NatWest said:
Please note that you can make an overpayment of 10% or less of your mortgage balance in any 12 month period (Starting from the date of your current mortgage product rate) without incurring an early repayment charge (ERC). If the payment you are setting up exceed the 10% overpayment limit, we will stop taking the payment.
Please note that overpayment will not reduce your contractual mortgage term.
So, if I overpay by 10% of the mortgage balance every year (not likely, somewhere around 5%) it will not reduce my contractual mortgage term? Is this in regards to my 5 year fixed interest period or the entire mortgage term? I will be remortgaging after the fixed term regardless.Please note that overpayment will not reduce your contractual mortgage term.
I would've preferred to ask NatWest directly but it's seemingly impossible to get through to someone on live chat/phone during the working day, so I thought I'd post here as I'm well aware there are knowledgable folk on here who may be able to help, or at least arm me with some queries I should raise with NatWest when I eventually get through!
If you overpay they will reduce the amount they take per month, while keeping the term the same.
What normally happens is you overpay then at the end of your fixed deal you can reduce the term then using the lower amount you need to borrow.
It is still beneficial to overpay, as you will reduce the interest payments on the balance.
What normally happens is you overpay then at the end of your fixed deal you can reduce the term then using the lower amount you need to borrow.
It is still beneficial to overpay, as you will reduce the interest payments on the balance.
Condi said:
If you overpay they will reduce the amount they take per month, while keeping the term the same.
What normally happens is you overpay then at the end of your fixed deal you can reduce the term then using the lower amount you need to borrow.
It is still beneficial to overpay, as you will reduce the interest payments on the balance.
Okay so if I'm currently paying £1000pm, I notice they add ~£500pm in interest on to the total mortgage balance... If I up this to £1500pm, I should in theory see the ~£500pm in interest figure decrease?What normally happens is you overpay then at the end of your fixed deal you can reduce the term then using the lower amount you need to borrow.
It is still beneficial to overpay, as you will reduce the interest payments on the balance.
What you will see is an "overpayment balance" build up, and yes, a lower interest payment. More of your £1500 will go towards paying off the capital rather than the interest.
When you remortgage in 5 years time, your total amount you need to borrow will be lower than expected, so you can reduce the term then if you're comfortable with the higher repayment.
When you remortgage in 5 years time, your total amount you need to borrow will be lower than expected, so you can reduce the term then if you're comfortable with the higher repayment.
Condi said:
What you will see is an "overpayment balance" build up, and yes, a lower interest payment. More of your £1500 will go towards paying off the capital rather than the interest.
When you remortgage in 5 years time, your total amount you need to borrow will be lower than expected, so you can reduce the term then if you're comfortable with the higher repayment.
Okay, maybe not as simple as I thought it'd be in terms of overpayment = reduced term but it sounds like it's fundamentally the same thing. However, I'll only be able to reduce the term come remortgage time in 4 years, were we will probably maintain the same overpayment figure with the new provider, except it'll no longer be an overpayment, just a standard payment and my term will be reduced accordingly?When you remortgage in 5 years time, your total amount you need to borrow will be lower than expected, so you can reduce the term then if you're comfortable with the higher repayment.
95JO said:
Okay, maybe not as simple as I thought it'd be in terms of overpayment = reduced term but it sounds like it's fundamentally the same thing. However, I'll only be able to reduce the term come remortgage time in 4 years, were we will probably maintain the same overpayment figure with the new provider, except it'll no longer be an overpayment, just a standard payment and my term will be reduced accordingly?
Yes. be careful of penalties if go above 10% overpayments Halifax were nice about it but hear NatWest penalise you-should be in your mortgage original paperwork
when I was overpaying I could choose between monthly reduction or term reduction but then changed to monthly reduction only-I can only assume they make more money in interest if you keep term as well as more likely when you remortgage keep the term and reduce monthly payment trapping you again!
when I was overpaying I could choose between monthly reduction or term reduction but then changed to monthly reduction only-I can only assume they make more money in interest if you keep term as well as more likely when you remortgage keep the term and reduce monthly payment trapping you again!
p1doc said:
be careful of penalties if go above 10% overpayments Halifax were nice about it but hear NatWest penalise you-should be in your mortgage original paperwork
when I was overpaying I could choose between monthly reduction or term reduction but then changed to monthly reduction only-I can only assume they make more money in interest if you keep term as well as more likely when you remortgage keep the term and reduce monthly payment trapping you again!
Indeed, I won't come close to overpaying over 10% though!when I was overpaying I could choose between monthly reduction or term reduction but then changed to monthly reduction only-I can only assume they make more money in interest if you keep term as well as more likely when you remortgage keep the term and reduce monthly payment trapping you again!
It seems I don't have the option to reduce the term, as per above. Are you liking this to the usual annual car insurance game were they hope lazy people let their insurance auto-renew for a substantial premium?
p1doc said:
be careful of penalties if go above 10% overpayments Halifax were nice about it but hear NatWest penalise you-should be in your mortgage original paperwork
when I was overpaying I could choose between monthly reduction or term reduction but then changed to monthly reduction only-I can only assume they make more money in interest if you keep term as well as more likely when you remortgage keep the term and reduce monthly payment trapping you again!
Just to further complicate matters, some banks don't allocate small monthly overpayments towards an actual 'overpayment penalty'when I was overpaying I could choose between monthly reduction or term reduction but then changed to monthly reduction only-I can only assume they make more money in interest if you keep term as well as more likely when you remortgage keep the term and reduce monthly payment trapping you again!
I'm with Barclays and any monthly overpayment of less than 3 times the usual monthly payment doesn't count towards this 10% overpayment. So last year I made a lump sum payment of 10% of my outstanding amount (ie the max amount I could without any penalty), then could continue overpaying by X amount per month without falling foul of the 10% overpayment penalty!
I'm sure they make it as confusing as possible on purpose.
NatWest said:
Please note that you can make an overpayment of 10% or less of your mortgage balance in any 12 month period (Starting from the date of your current mortgage product rate) without incurring an early repayment charge (ERC). If the payment you are setting up exceed the 10% overpayment limit, we will stop taking the payment. Please note that overpayment will not reduce your contractual mortgage term.
A lot of these sentences should end with 'unless you tell us otherwise'. The 10% sentence indicates your money is probably asleep in a holding account until you either tell them what to do with it or it grows large enough to satisfy the next DD. Many people just send money to their mortgage account and expect the lender to know what they were intending i.e. reducing monthly DD, reducing term, or, a fat-finger typing error whilst sending your life savings to an African prince for his sick mother.Lender's can't make this decision for customers so they bung in the option that suits them. If you want to specify what you want doing with the money it's usually just a phone call unless the lender can come up with an enforceable reason to say nope.
Julia121 said:
A lot of these sentences should end with 'unless you tell us otherwise'. The 10% sentence indicates your money is probably asleep in a holding account until you either tell them what to do with it or it grows large enough to satisfy the next DD. Many people just send money to their mortgage account and expect the lender to know what they were intending i.e. reducing monthly DD, reducing term, or, a fat-finger typing error whilst sending your life savings to an African prince for his sick mother.
Lender's can't make this decision for customers so they bung in the option that suits them. If you want to specify what you want doing with the money it's usually just a phone call unless the lender can come up with an enforceable reason to say nope.
Interesting, thanks for that Julia - I'm going to give them a call to discuss in more detail. Hopefully I'll be able to get through...Lender's can't make this decision for customers so they bung in the option that suits them. If you want to specify what you want doing with the money it's usually just a phone call unless the lender can come up with an enforceable reason to say nope.
Nationwide have a very good overpayment calculator that give you both a table and graph of your projected over payment so you can see what various over payment amounts would look like for you.
https://www.nationwide.co.uk/products/mortgages/ou...
https://www.nationwide.co.uk/products/mortgages/ou...
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