Capital repayment - reduce payments or term?

Norbury

Hi, I have a mortgage with the Vernon Building Society, I am currently in the second year of a three year fixed rate deal (5.99%, with hindsight not the best move). I have the option to repay without penalty up to 10% of my capital once a year, and the further option that this reduction in capital can lead to either a reduction in the term or a reduction in the repayments over the existing term. Which option saves me most money, and by how much? I expect the reduction in term to save me the most, but I don't know how much by - and obviously reducing my repayments gives me more cash in hand, which would also be good as I have a new baby.

pixiepie99

You need to stick the figures into an online overpayment calculater - there are loads of them around.

You want to reduce the term of the mortage and keep your repayments as high as possible to bring the capital down. This will save you the most money.

getmore4less

http://www.whatsthecost.com/mortgage.aspx

Stick your numbers in and it will tell you. (set to interest only for the payment box)

Borrow as little as possible
For the shortest time possible
At the lowest rate possible

Optimise all three for the lowest cost borrowing.