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Interest only mortgage question

edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
4 replies 893 views
1_step_closer1_step_closer Forumite
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edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
I have a very quick question - due to financial things beyond our control, we are on interest payment only right now. (With C&G)
If we make overpayments no matter the size - and this may be a stupid question - can we ask that the capital be repaid? would this after a while bring down the interest and eventually reduce the interest only payments we make?
Really cannot afford a repayment mortgage right now, only 1 wage coming into the house.

Thank you

1 step xxx
If you wait for perfect conditions, nothing would ever get done! :T
I'm not short - I'm condensed awesome! :p

Replies

  • 1_step_closer1_step_closer Forumite
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    Can anyone advise on this at all?
    If you wait for perfect conditions, nothing would ever get done! :T
    I'm not short - I'm condensed awesome! :p
  • financialblissfinancialbliss Forumite
    1.9K Posts
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
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    Can anyone advise on this at all?

    Hi,
    Say you've got a 100k mortgage at 5% interest. That's roughly 416.67 a month interest only.

    So, you start the month at 100k, get charged 416.67 in interest and also pay 416.67 IO to your mortgage. The net result at the end of the month is still 100k.

    Say you make a capital payment of £1,000. You now owe £99k. You lender may or may not recalculate your monthly payment.

    I estimate that you would pay £412.50 IO on £99k.

    So, to reply, any overpayment over and above your normal IO amount will bring down the total outstanding balance. Can't say if your lender will recalculate your monthly IO amount - you would have to contact them.

    If at all possible, keep the same monthly payment, which means over time, you will start overpaying every month. Ie if you did not change from 416.67 to 412.50, this would be an overpayment of £4.17 every month.

    FB.
    Mortgage and debt free. Building up savings...
  • edited 28 January 2010 at 2:58PM
    BrodiebobsBrodiebobs Forumite
    1K Posts
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    edited 28 January 2010 at 2:58PM
    we have a c+g mortgage and its interest only due to redundancy a few years ago, now were back on our feet we set up a direct debit to pay extra every month. You can download a form on their website and you put how much extra you want to pay and where you want it to go, if you have sub accounts.
    Really handy as you can ammend the monthly amount as and when you need to.

    As above any extra payments you make above the interest will decrease the capital..
  • 1_step_closer1_step_closer Forumite
    972 Posts
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    Thank you for your help - that explains a lot, interesting about the mandate form as well!

    I know it seems an odd way to overpay but just cannot afford the repayment figures right now.

    Thanks again
    If you wait for perfect conditions, nothing would ever get done! :T
    I'm not short - I'm condensed awesome! :p
This discussion has been closed.
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