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Interest only mortgage vs repayment?
Puddlesplasher
Posts: 23 Forumite
Just wondering which is going to be the best method for us? We have always had a repayment mortgage but are currently remortgaging with the Woolwich (£80k over 16 yrs, BBR +0.89% lifetime tracker)
I am trying to work out which method will get the mortgage cleared more quickly. The Woolwich have said that any overpayments will immediately reduce the balance. As they calculate their payments once a year then any subsequent overpayments will have an even greater effect. I can make unlimited overpayments without penalty.
As in the early years of a mortgage the capital reduces slowly I wondered if I might reduce the balance more quickly by overpaying an interest only mortgage? For example if I overpay by £400 each month the balance will have reduced by £4800 over 12 months. This is surely going to be quicker than just making the normal payments on a repayment mortgage? Any thoughts on this?
I am trying to work out which method will get the mortgage cleared more quickly. The Woolwich have said that any overpayments will immediately reduce the balance. As they calculate their payments once a year then any subsequent overpayments will have an even greater effect. I can make unlimited overpayments without penalty.
As in the early years of a mortgage the capital reduces slowly I wondered if I might reduce the balance more quickly by overpaying an interest only mortgage? For example if I overpay by £400 each month the balance will have reduced by £4800 over 12 months. This is surely going to be quicker than just making the normal payments on a repayment mortgage? Any thoughts on this?
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