Overpayment on Mortgage 25 August 2008 at 6:32PM in Mortgage-free wannabe 3 replies 746 views

beaches_2

Overpayment On Mortgage
This is my first posting, please bear with me! I've posted this in the Mortgages thread by mistake, so here it is again!
We are looking to over pay our mortgage to enable us to stop working full time sooner.
We owe £41,900 (£23,500 Interest only, £18, 400 repayment), have 6 years left and are on a fixed Mortgage until 5/09 at a rate of 5.29%. We pay £413 per month.

We've had advice to overpay on the Interest only part.
I'd be grateful for any feedback.

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phizzimum

Hi Beaches, and welcome

I don't know much about interest only mortgages, so I can't comment on your question. Are there any penalties or limits on the amount you can overpay? Are these the same on both mortgages?

I'm sure you will get some more knowledgable replies soon

dimbo61

Well the first thimg to do is contact your lender and dig out the terms &
conditions of your mortgage.
What does it say will happen to the mortgage after the 5.29% fix has finished ?
You should if you can afford too also try and fill a cash ISA each this year
as the best buys are paying over 6%. so 2 x £3600=£7200
Find out if you can overpay and if any limits ie £500 a month ( Nationwide )
or 10% a year or unlimited overpayments and pay what you can afford.
Overpaying and saving into tax free ISA,s will soon build up the funds to clear that mortgage GOOD LUCK

MarkyMarkD

The reason for the advice to overpay on the interest only part is that, if you overpay on the repayment part, the contractual repayments will fall (unless the term is reduced) and hence the ability to overpay in future may fall.

If you are allowed limitless overpayments, it probably doesn't make any difference which part you choose to overpay.