do I overpay the interest only or repayment part of my mortgage?

Rising_Sun

Hi, I'm trying to pay off my mortgage as fast as possible!

I have a fixed rate deal coming to an end later in the year it was a 5 year deal at 5.15%. At the end of this term I'll be looking to remortgage in order to minimise the term and be mortgage free as soon as possible, well that is the plan!

I currently owe £31500 on the repayment part, and £41000 on the Interest Only part. Interest is calculated daily.

I can make overpayments of 10% PA and I did this in the 2007/2008 year - I paid £8000 - at the same time I asked for my monthly payment to remain as before - about £620/month. The overpayment came off the Repayment part. I can make another 10% overpayment before the end of March 2009 (the 2008/2009 year) and another in the 2009/2010 year, from April.

My question is as follows - is it right to overpay the repayment part of the mortgage? Or would this be better taken from the Interest part, I've read lots of posts and I am pretty sure the overpayment is good news but I just want to make sure I'm using every penny to best effect!

Any advice really appreciated!

Cheers

dimbo61

Are you paying the same rate of interest for both parts of the mortgage ?
The repayment part of the mortgage has a finish date the IO part does not as you are simply paying the interest and will need/have a repayment vehicle !
At the end of your existing deal could you change the whole mortgage onto repayment !or get an offset mortgage and save into the offset account.

jamesd

The repayment portion is the one to do because that will leave you with greater flexibility to decrease payments in the future if your financial situation becomes less good.

For the same reason you wouldn't want to reduce the mortgage term or go repayment only, because making routine overpayments on an interest only mortgage maximises your flexibility, letting you decrease the overpayments if necessary, without having to beg your lender.

Also worth remembering that with offset mortgages you can build up a large offset pot to remove the mortgage interest and retain full flexibility with all of that pot avilable if needed. Easy to use the offset pot to clear part of the mortgage at one of the remortgaging times, if desired.