Overpay a lump sum on the interest only part or the repayment part?

Grrra

Apologies if this question has already been answered.

We have roughly a £17,000 mortgage interest only and £22,000 repayment. They both have 9 years left to run. We are in a position to overpay about £8,000 but are unsure whether it makes any difference to overpay the interest only part or the repayment part?
Any help or advice would be greatly appreciated.

opinions4u

It should make no difference.

Whichever part has the highest rate and no early repayment penalties.

Charterhouse

Overpay the interest only bit because that gives you more flexibility. In 9 years, as things stand, you will have paid down the repayment mortgage and have £17,000 outstanding on the interest only mortgage. If you pay down the repayment mortgage now, they will by default reduce your per month direct debit so as to leave you with the £17,000 IO still outstanding in 9 years, unless you make a conscious effort to get them to keep the payment the same. If however you pay down the IO part instead, you will only have £9,000 of debt in 9 years time instead of £17,000.

If you are planning on repaying it all before the 9 year maturity, then the 1st person replying is right, it really makes no difference, but it is nonetheless probably slightly administratively easier to pay back the IO part first.

Grrra

Hi,
Many thanks for your helpful responses - much appreciated. Indeed, 'if' all goes well there may be a possibility of us paying the mortgage off in about 3 to 4 years... all being well...
My wife tells me that she has been in touch with Nationwide BS, who have informed her that should we pay off £8000 with the repayment part then our montly repayments will be around the £190 a month mark - compared to the £270 mark we currently pay. Should we knock off £8000 from the interest only (£17000) then the repayments will be around the £250 per month.

Thrugelmir

Grrra wrote: »

Hi,
Many thanks for your helpful responses - much appreciated. Indeed, 'if' all goes well there may be a possibility of us paying the mortgage off in about 3 to 4 years... all being well...
My wife tells me that she has been in touch with Nationwide BS, who have informed her that should we pay off £8000 with the repayment part then our montly repayments will be around the £190 a month mark - compared to the £270 mark we currently pay. Should we knock off £8000 from the interest only (£17000) then the repayments will be around the £250 per month.

If you can afford to maintain the repayments do.

Its in the interests of the Nationwide for you to borrow the money over as long a period as necessary.

By reducing your repayments you will still repay your mortgage as per the original term. Its a better discipline to overpay regularly than think you have plenty of time to find a lump sum, and find that the money has been frittered away.

Grrra

Hi,
Many thanks for the reply. I do like the idea of trying to keep to the higher payments (overpaying) in an attempt to pay-off the mortgage earlier than anticipated. We do have an ISA which should help towards the final payment, which fingers crossed - should be reasonably soon.