Overpaying Advice

triplea

Hi everyone,

I have a split fixed rate mortgage, both bits are the same rate,

65,000 on repayment
100,000 on interest only

We can now afford to overpay by £300 per month. Which bit do i make the overpayment on? repayment or interest ?

I know this probably sounds a bit thick, but I'm clueless!

Thanks

TOPAZ_2

Triplea,
If they are on the same rate - it makes no difference financially.

However, as the interest only part is the higher of the two, I would personally start with this one first.

Topaz

dimbo61

Your repayment part is decreasing each month as you make a payment but your IO mortgage is static as you are only covering the interest so make the overpayment off the IO part and ask your lender to keep the payments static so you are paying a tiny bit extra each month

Peelerfart

As has already been stated, it really doesn't make any difference.
Personally I would pay off the repayment part , this is for two reasons.
1. The physcological boost of seeing the balance tumbling,but more importantly,

2. This would reduce the amount that you have to pay should you ever need to just pay the minimum, redundancy for example.

Just my opinion, whatever you decide to do it's a good feeling to tackle the biggest debt you'll probably ever have

littlemrtinkle

i would go for the smaller one first (repayment) this one will be the quickest to get rid of, leaving you only one to concentrate on.

angelacollman

hi triplea
It doesn't make any difference, if you wanted to start then start on with repayment first, that is less in numbers, so will help your morale boost to increase.

Regards
Angela

Dreamingalound

good luck, when you start to see the amount reduce over the next 12-18 months its so motivating!

financialbliss

triplea wrote: »

I have a split fixed rate mortgage, both bits are the same rate,

65,000 on repayment
100,000 on interest only

Hi triplea,

Have you currently got a repayment vehicle in place to pay off the interest only part of the mortgage once it reaches the end of the term?

If not, then if it was me, I'd want to concentrate on the interest only part. However you have 3 options:

a) pay down repayment part first
b) pay down interest only part first
c) split payments between both parts of the mortgage

Depending on the remaining mortgage term, I'd possibly lean towards paying the IO part first. Even if you have a repayment vehicle in place, eg endowment, this could be under performing thus leaving a shortfall in the IO part.

Do check with your lender to make sure you can repay without charges.

FB.