Part and Part Mortgage - should we change to repayment only?

picardygirl

Hi - i asked this question over on mortgages and endowments and was advised to come here for answers - i've had a search and think i've answered my own question but would like some clarification.

We currently have £40k on interest only and £138k on repayment only (fixed with NR til november 2011) our required monthly payment is £1063.

We have recently cashed in our endowment and paid a large overpayment on our mortgage (possible with NR) so now have no repayment vehicle as such. We intended to then change the whole mortgage to repayment only - monthly payment required £1119 with a one off fee of £75 to change the mortgage, we then intended to overpay slightly too increasing our payments to £1150.

When i rang NR to make this change, the chap i spoke to recommended instead of paying the £75 fee keep the mortgage on part and part but overpay on the interest only part as if we were paying a full repayment mortgage ie, pay £1119 instead of £1063 - we wanted to overpay anyway to reduce the mortgage - we've upped our payments to £1150 from 1 July - NR have advised the overpayment goes straight off the interest only part only, and then when our fixed deal is up change to complete repayment only.

So my question is, is this the best way of going about doing it, i would rather pay the £75 up front and reduce the mortgage by more, or does it equate to the same if we overpay the interest only side and therefore reduce it over the next 2 and a bit years?

Thanks in advance for any thoughts

chirpchirp

Are you paying the same interest rate on both the repayment part and the interest only part?

picardygirl

chirpchirp wrote: »

Are you paying the same interest rate on both the repayment part and the interest only part?

Yes - both the same fixed at 5.29%

chirpchirp

What percentage can you overpay without incurring penalties?

It seems to me that the advisor was right there is no point in paying the £75 fee, just pay that off the mortgage too. It would be worth it if the interest rate was cheaper on the repayment part but as they are the same you may as well save the £75.

picardygirl

We can overpay what we want without penalties fully flexible NR mortgage.

What threw me with the NR advisor, is that normally they always say they cant advise us what to do. When i first rang up NR to find out what repayment monthly payment would be, it wasnt even suggested we stick to part and part, just told yes it can be done but with a fee of £75. But after reading a few posts on here, i'm off the thinking we should stick to part and part too - then change the lot when our current deals ends.

So thanks chirpchirp, we might as well save our £75 fee and stick with just overpaying on the interest side.

chirpchirp

Personally I like interest only mortgages if you can be diciplined and make overpayments thus making it like a repayment mortgage. This means that if things get tight because you are made redundant or something you will be paying a lower amount officially. The problem with changing to a repayment mortgage is that your official mortgage payment is increased and if your income goes down you may regret changing.

Peelerfart

I agree with chirpchirp 100%. My own sentiments exactly,it's all about discipline and flexibility.
That's why I'm paying down the repayment part as much as I can so that all I will have left is the IO bit which I will then begin to OP if circumstances allow.If not I won't and no-one will scream.

picardygirl

Thanks guys - you've both reassured me to do what NR advised me to do. I'll stick with it and try and overpay as much as we can in the next couple of years. I've already agreed to do the overpayment with NR so will stick with it x