Newbie help please

Belt-tightener_2

I have a small mortgage with 10 years left on repayment. In fact out mortgage is so small when we wanted to modernise we could not re-mortgage and had to get a loan, we can't over pay on this.

So I owe £24,000 over 10 years.

Now we do not have much spare as only husband works but I have just finished paying off the sofa so I will have £50 to over pay by.

I am confused should be paid off capital, interest or both?

Any help is welcome.

Floxxie

Hi,

Welcome to our board!

Do you know what interest you are being charged? Can you make overpayments without penalties? Is there a penalty in place if you pay off the mortgage before the 10 years are up?

If you can get the answers to these, that will determine how you should go about paying it off. Whether it is capital or interest, it doesn't matter. What does is that you ask to have the term reduced rather than your monthly payment.

P.S. I am assuming that you want to pay off the mortgage earlier!

Floxxie

Floxxie

Just reread your message - is it the loan or the mortgage that is £24,000 and has 10 years left to run?

(You could have taken out a mortgage for the level that they would remortgage you at - some as low as £25,000 and then repaid anything you didn't need. A mortgage adviser would have been able to sort this out for you)

Floxxie

Belt-tightener_2

It's the loan we can't over pay on, we took a loan rather than a mortage as with the fees for the one company that would remortage on it would have cost a lot more and it would have been another fixed term at a high interest rate it was about 2 thousand pounds cheaper our way. the loan is 5 years with 2 left the mortage is 10.

Floxxie

Ok, so your mortgage has 10 years left to run with £24k outstanding.

If you find a calculator (I use https://www.jeacle.ie) and plug in some figures, including your rate, then you can see how much your mortgage term will reduce if you overpaid the £50 (for example).

You will need to have the answers to the questions I asked to decide what you should do.

Floxxie

abouttimetoo

Hi Belt tightner

I'm reading this a little different to Floxxie - you have a loan not a mortgage (ok, so they are both borrowed money). Can you tell us what interest rate you are being charged? You say that you can't make overpayments - this seems a bit strange - is it in your terms and conditions that you can't do this or is it that you would be charged for making overpayments and you don't want to pay them?

I think what Floxxie was meaning was that even though you only needed a
£25, 000 you could have borrowed more (say £50k for the sake of arguement) to get a better deal than immediately paid back the excess that you didn't need.

Without knowing any more details options to look into off the top of my head are

• can you re-schedule the loan over a slightly lesser term taking the payments up to whatever they would be including your spare £50 e,g if you pay £200 a month now can pay £250 - can they reduced the term whereby the monthly payment needed would be £250
  • only do this if you know you can afford the £50 every single month
• find out if there is any penalties for repaying early (if you absolutely can't make OP's this seems likely) but if not or they are not too restrictive can you move some of the borrowing to 0% or a cheaper rate credit card - effectively paying a lump sum off your loan then using the £50 to pay the cc off. If this looks viable you could potentially do this a number of times

Hope what I've said makes sense but I guess until we know the interest being charged and that you are absolutely sure you can't overpay, reduce term or pay off early we are only guessing. I'm not saying it's impossible but I've never ever heard of a loan that can't be paid off early and I used to deal with such things albeit a long time ago:rolleyes:

Floxxie

Well I'm confused about the whole thing now!

I've read it that there is a loan that was taken out for 5 years and there are 2 years left on it and a mortgage that has 10 years left. They wanted to borrow extra on the mortgage for modernisation but because their mortgage was so low (i.e. below £25k), they couldn't so borrowed the money through a loan.

Umm, that's as far as I got. Perhaps Belt-tightener could come back and fill in some of the gaps?

Floxxie

Belt-tightener_2

Floxxie is right

We have a 10 year mortgage and 2 years left on a loan

We honestly looked at remortaging but as we wanted such a small amount by the time we looked at fees and as the loan would of been over a longer period it was not worth it, we were in a fixed deal on our mortgage so to come out of that then pay fees for a new one we were a lot better off with a very small loan.