Advice on iterest only mortgage with overpayments please!

DMS_3 · 17 January 2006 at 2:47AM

I was hoping to get some advice on my mortgage plan:

I am a first time buyer and am about to go with Cheltenham & Gloucester for my mortgage (it seems to be the best one out there for me at the moment).

I am due a pay rise in August but I can't afford a repayment mortgage yet so I am going to go on an interest only (fixed rate for 2 years) scheme. The repayments are around £1000 and I intend to overpaying £100+ each month.

My plan is to go interest only for the 2 year fixed term whilst making regular overpayments (as much as I can afford, therefore hopefully reducing the capital), and then in two years time (after my pay rise) change it to a shorter term repayment mortagage.

As I am new at this I was hoping to get some feedback to check that I am not doing something drastically wrong!

Thanks.

silvercar · 17 January 2006 at 10:12AM

Seems a good plan provided that there are no repayment penalties for making overpayments during the fixed term. Also check that your interest is calculated on a daily interest basis, otherwise you won't gain the benefit of the capital repayments until the end of the year.