Mortgage Free?

tinkerbell81

I am relatively new to this, so you'll have to excuse me if I am sounding rather daft!

I would like to become mortgage free (wouldn't we all!) and was wanting to find out how to do this. I know I need to contact my lender, though as i am currently on an interest only mortgage as it was the only way I could afford the house, do I need to change this to repayment?

I know I need to pay off the capital, but I asked them how much it would be to change from interest only to repayment a month or so back, and they said £956 per month, compared to my £405 per month at present. I can afford to change it over (with rates being so low), but if I do would I be tied to repayment in the event that they went up again. When I originally took out the mortgage I was paying £1045 per month, which was two years ago.

I am on a dicounted tracker deal at present which is extremely good as it is .55% above BOE, but in Feb 2010 it will change to a standard Variable, which is also worrying me as I know my payments will increase.

Also would I be better changing it to repayment, or saving the money then making overpayments at regular intervals? OR come Feb 2010 have the money sitting aside to help me remprtgage as I may get a better deal than the varaible one I will have to switch to giving me a bigger deposit as such.

All help greatfully received.

Horse_Owner

You would have to recontact your bank if you decided to go back to interest only. I think it would be up to them if they let you.
Interest rates being what they are (ie crap for savings) IMHO you would be better putting it on your mortgage

dimbo61

Right tinkerbell81 you are £640 a month better off each month than you were 2 years ago and with BOE rates hopefully staying low for the rest of this year ( but who knows ! ) now is the time to overpay ( if allowed ! check with lender ) or save into cash ISA,s if paying more than your current mortgage interest rate 2.05% for the next 12 months and thats £7680 plus interest in just 1 year.
You can stay interest only until feb 2010 and then move onto a repayment mortgage after paying off the lump sum saved or overpaying each month.
( you can only put £3600 EACH ! into a cash ISA in one year ) so overpay the rest.

tinkerbell81

I already have used my and my other halfs ISA allowance for this year already, but will start putting that money into the ISA next year and save the money and then overpay (if allowed) when we have reached the limit again. Came Feb 2010 I will have less owed on the mortgage and hopefully get a better deal than the standard variable that they will be offering me.

Thanks for the advice