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Interest only - Capital repayment

I toke out an Intrest only mortgage on my first home October last year due to the amount of renovation required i wanted to max my cash flow. I planned within 18months to start paying capital of the mortgage. The acutal mortgage i have if very flexible on repayments (Intelligent Finance). My question is as now able to pay some capital of each month as i'm better finacially than was budgeting. due to the low interest rates in my favour and being better finacially (job pay rise) than expected.

I was wondering by saving a captial payment each month (the seperate current account i used for mortgage all money in there is deducted of interest on my mortgage) and then bulk paying it in 6 monthly buckets. Is this actually better than having a standard mortgage? As i know on a standard mortgage you will pay mainly interest for the first few years.

I have not been able to pay a lot of as last month and this one i have put £100 extra away, but i plan on uping this each month now. Keeping it lowish at the moment while im able to furnish the house without taking any loans or credit. As being a first house i have everything to buy and its not proving to be cheap lol.


Sorry for the long waffeling post, but wondering if you could tell me paying capital of interest only mortgage is actually better/same or worse than standard mortgage.

Thanks
Rhys

Comments

  • RufusA
    RufusA Posts: 939 Forumite
    500 Posts
    In theory they should have the same affect (assuming interest is recalculated daily).

    However it's more down to personal discipline. If you are *forced* to make a repayment each month that is taken out of your grasp there is less temptation to not make it, or dip in to it after a couple of years for a home improvement etc.

    Personally I prefer the flexibility of an offset, BUT I don't think it suits a lot of people!

    I'd suggest setting yourself a six monthly target for lump sum payment and trying to stick with it - hell or high water. Otherwise it's easy for a few years to drift and the capital to largely remain unchanged! With low interest rates you should ideally be aiming to pay more than you'd need to clear the mortgage at the end of the period. Use a mortgage calculator to see what the minimum repayment should be:

    http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

    HTH - Rufus.
  • RhysH
    RhysH Posts: 50 Forumite
    Thanks Rufus. Think i will set a little spreadsheet up.

    Will have to sort my finances out and start properly paying the mortgage off.
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