How will it work?

Ok so my OH and I are on our first mortgage. Its interest only and currently fixed at 5.24% with Abbey and the fixed rate expires in June. We only have 10% equity so we know there aren't any brilliant remortgage deals out there so we are just going to move onto the SVR (currently 4.24%) which will save us £140 a month :j

However we're going to be good people and start to over pay - we want to up our payments to £900 a month which will mean we are repaying £300 a month.

My question is how will this work as we are on an interest only mortgage? Will they recalculate the amount I am paying interest on every month. ie month one I am paying interest on £169,300, month 2 I am paying interest on £169,000? Or do they only calculate interest at the end of the year?

Any advice much appreciated!

Replies

  • Trying_to_be_goodTrying_to_be_good Forumite
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    Part of the Furniture 1,000 Posts
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    It will depend on your lender, as different lenders do things differently.

    The important bit to check is whether you are on daily, monthly or annual interest calculations (not repayment calculations, that's a differnet thing).

    Ideally, if you say to your lender you want to keep your monthly payment at £900, it should mean you are overpaying a little bit more each month, compared to the last month.
    Mortgage Free thanks to ill-health retirement
  • dimbo61dimbo61 Forumite
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    Part of the Furniture 10,000 Posts Name Dropper Photogenic
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    If you can afford to overpay by £300 each month could you afford to change onto a repayment mortgage.
    You need to contact the abbey yourself and find out what deals they will offer you now!
    If you can get a ling term fix of say 5 years and change to repayment it will give you some security for the next few years. GOOD LUCK
    This is only my opinion !!
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