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Advice - interest only mortgage - overpay or save?
brucito
Posts: 4 Newbie
Hi
I'm on a great tracker interest-only mortgage at the moment, and wanted advice on the best thing to do now that the rates are down. I treat my i-only mortgage like a repayment one - overpaying when possible.
My main question, is should I overpay more now (paying £900, mortgage around £460), or should I overpay less and save some in savings account or something so I have cash set aside for rainy days (e.g. pay £600 to mortgage, save £300 in high interest savings?). I'm just not sure if you should always try get as much capital paid off, or whether it's actually more intelligent to keep money when you can, and then pay off at other times when you don't need the cash? I have no other debts and not struggling at all - but I would like to rent the house out in the nearish future too.
Any comments or advice?
Many thanks,
Bruce
I'm on a great tracker interest-only mortgage at the moment, and wanted advice on the best thing to do now that the rates are down. I treat my i-only mortgage like a repayment one - overpaying when possible.
My main question, is should I overpay more now (paying £900, mortgage around £460), or should I overpay less and save some in savings account or something so I have cash set aside for rainy days (e.g. pay £600 to mortgage, save £300 in high interest savings?). I'm just not sure if you should always try get as much capital paid off, or whether it's actually more intelligent to keep money when you can, and then pay off at other times when you don't need the cash? I have no other debts and not struggling at all - but I would like to rent the house out in the nearish future too.
Any comments or advice?
Many thanks,
Bruce
0
Comments
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What's the point in overpaying an IO mortgage? You don't pay ANY capital with an IO mortgage!0
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I have an interest only mortgage with Britannia and it is my understanding (after confirming with them) that after you have paid your interest payment for the month any overpayment gets deducted from the capital.
I also know this because I just got a mortgage balance ready to change when my rate ends and we have reduced the capital by £2523.67 since 31st Dec 2007.
What gave you the idea that an overpayment doesn't pay off capital?
Deb0 -
Yes, I dont quite follow either. You can pay a lump sum off Id have thought but as you arent paying any of the capital back with your payments ..........................? Great it you can do it, just never heard of it0
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If you overpay the mortgage you make a return equivalent to the interest rate payable on the mortgage.
So compare that return with what you can get in a savings account.Bear in mind that unless the money is in an ISA, savings interest is taxable while overpaying the mortgage is not.Trying to keep it simple...
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Very interesting people - thanks for that info.0
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How do you plan to pay back the capital owed?0
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