paying in a wee bit extra

stoneyloon_2

I've decided to stop paying into one of my regular savings and pay a bit more into my mortgage.
I have a total mortgage of £153,500 (69k repayment, 84.5k int only) on a £250,000 property.
Are there any benefits of paying into the interest only versus the repayment? (or vice versa)

I've already checked and I will not incur any charges.....

Cheers for any help,

Stoneyloon........ :beer:

TOPAZ_2

Stoneyloon,

I am in a similar situation to you.

If the interest rates are the same - then there is no difference in financial benefit, as you will be charged the same rate of interest.

The only difference is that the repayment part already includes an element to reduce the capital amount and the interest only one doesnt - so personally I would pay the extra off the interest only part.

This has no additional financial benefit though

Topaz

EssexHebridean

Hi Stoneyloon I can't answer your question I'm afraid but thought I'd stop by anyway and say hello and good luck!

Welshlassie

IO part as the repayment part will be reducing the capital and therefore reducing the interest, but the interest won't be coming down on the IO part, therefore every future payment you put towards the IO element will also start to reduce the capital assuming you keep the monthly payment the same

davies0121

If the interest rates are the same - then there is no difference in financial benefit, as you will be charged the same rate of interest.

Hello Stoneyloon (from a fellow follower fae Bervie)
First off, there is always the question of your mortgage deal. Can you clarify? Of course this will make the difference between good and mediocre answer. Hope this board can help you out.

Secondly, well done on the decision. I have just done similar, savings have just gone pants for me and I thought, mortgage is way higher. Time to pay off.

stoneyloon_2

Cheers folks!

OK, the deal I'm on is 5.25% fixed til 28/02/2009 on both the repayment and IO, then goes to LTSB SVR which is 4% I think. I plan to continue to pay the same amount as now, therefore increasing my overpayments.

Any more thoughts or advice?

Joe_Bloggs

@stoneyloon and all, and in agreement with all.
If you are allowed to make capital repayments into the interest only section of your mortgage without penalty. And if ,the lender takes prompt notice of this repayment then :-
You will owe less money on the interest only part of the mortgage and be charged less interest on the capital outstanding.

There are often barriers to overpaying so you have to check the terms and conditions as they apply to you.

A repayment mortgage has a built in repayment schedule. It may be left to the wits of the borrower to come up with an irregular series of repayments of the capital borrowed on the interest only part.
J_B.