Interest only vs repayment

bungalow_bill

Hi...I'm at present on interest only mortgage, and have a quote from mortgage company to switch to repayment. The difference is about £500 (plus admin fee). Would it be better to overpay this amount per month and leave it as it is on interest only, or switch to the repayment?

Would this make a difference to length, total amount paid overall? Any help appreciated

Pee

I think you will be better off overpaying the £500 a month, especially if you plan on remortgaging in the future. However, the word of caution is that this only works if you are diligent about the overpayments.

bungalow_bill

Thanks for that. I guess what I meant was I'm happy to commit the extra money, its just I was trying to weigh up Keeping the interest only and overpaying, or switching to repayment with the automatic higher payments.

OVerall to me it'll be the same amount going out per month, but I'm not sure which is better long term

mortgage-adviser-now

You need to make sure the £500 overpayment does not incur an early repayment charge Bill.

Check with the Lender first.