mortgage overpayment

Rikki

saintknoxmissus wrote: »

Thanks Rikki
Again sorry to seem stupid, but which is best to pay off the interest or the repayment? Or is it all much of a muchness?

The repayment side is taking care of itself. Capital and interest being paid each month. (£26,000 will be paid off by the end of the mortgage term.)

The interest only side needs a payment vehicle in place ie: savings, ISA's etc to pay off the capital at the end of term. (You are only ever paying the interest owed each month none of the capital.Your £60,000 never goes down.)

Personally I would use any extra money to reduce the interest only side of the mortgage.

saintknoxmissus

Thanks Rikki
Makes perfect sense when you put it like that!

Bassey

Try this Overpayment calculator it gave me a real good idea of how much I would save if I overpayed on my mortgage

mortgages-loans-uk.co.uk/information/mortgage-overpayment-calculator.htm

Sorry it wont let me put in the link

Peelerfart

saintknoxmissus wrote: »

Thanks Rikki
Makes perfect sense when you put it like that!

And Rikki is correct .

Alternatively,

If you overpay off the repayment part two things happen -

1. more money becomes available for overpayment and,
2. the amount you HAVE to pay each month reduces

On that basis I would overpay the repayment section, but be aware of Rikki's comments

Bassey

Also because you are overpaying the interest payments will drop

DVardysShadow

Peelerfart wrote: »

And Rikki is correct .

Alternatively,

If you overpay off the repayment part two things happen -

1. more money becomes available for overpayment and,
2. the amount you HAVE to pay each month reduces

On that basis I would overpay the repayment section, but be aware of Rikki's comments

But if you pay off the interest only part, 2 similar things happen -
1. the amount you HAVE to pay each month reduces and
2. more money becomes available for overpayment.

so as the OP says, it is much of a muchness. The difference is how the mortgage is balanced between IO and repayment at the end of the period of overpayment

saintknoxmissus

Thanks everyone for your comments, i have a much better idea of what i need to do now, and the best thing is i should be able to afford to pay off a bit while the rates are still low, so its all good :T