Overpay interest only or go to repayment

Jbrennan
Jbrennan Posts: 2 Newbie
in Mortgages & endowments
Our interest-only mortgage deal is ending soon and we are currently doing some home renovations.
We always intended to change to repayment at the end of this deal, for peace of mind, but would we be better keeping at interest only and overpaying by up to the permitted 10%. This would give us flexibility if we need some cash short-term for the renovation? Is there any difference between paying off your capital by overpaying vs. the fixed repayment terms? Thanks

Comments

  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    edited 11 October 2016 at 7:03PM
    Do you have the discipline to make the regular overpayments?

    Are the overpayments sufficient to clear the balance?
  • MortgageMamma
    MortgageMamma Posts: 6,686 Forumite
    First Post First Anniversary Combo Breaker
    Will the overpayments clear your mortgage balance at the end of the term? Have you tried using the mortgage calculator on this website to work out how much you need to overpay?
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Name Dropper First Anniversary First Post I've helped Parliament
    Jbrennan wrote: »
    Our interest-only mortgage deal is ending soon and we are currently doing some home renovations.
    We always intended to change to repayment at the end of this deal, for peace of mind, but would we be better keeping at interest only and overpaying by up to the permitted 10%. This would give us flexibility if we need some cash short-term for the renovation? Is there any difference between paying off your capital by overpaying vs. the fixed repayment terms? Thanks

    Answering the question asked....

    NO.

    The payment you make determines the cost and real term of your mortgage(or whats left if not enough payments)

    all a repayment mortgage does is set a payment that will pay it off in the term and it becomes the contractual minimum payment.
  • Jbrennan
    Jbrennan Posts: 2 Newbie
    Thanks - guess it is short term option to give us flexibility while fixing up house. And ramp up overpayments when we can after
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    Jbrennan wrote: »
    Thanks - guess it is short term option to give us flexibility while fixing up house. And ramp up overpayments when we can after

    Keep your eye on the required level of capital repayment every month. It soon ramps up and becomes more challenging. More so if interest rates were to rise.
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