Interest Only

Senior_Paper_Monitor

Depends on the lender - but would probably want to see proof of current ISA account and payment record in most cases.

There is of course nothing to stop you (as indicated in my earlier posts) switching payments from the ISA to mortgage overpayments, once the mortgage is in place, should you decide this is financially beneficial to you (which it often is).

Pincher

These days, there is no barrier to overpaying, as the lenders want cash to satisfy FSA capital adequacy rules. So your contract might say up to 10% overpayment a year, but you just have to ask, and they'll snap it from your hands.

All you have to work out is whether you get a better return after tax by saving instead of overpaying. When the interest goes up, and the balance changes, start overpaying.

begbeer

Have never heard of a building society who will accept a larger percentage of overpayments than allowed unless you pay the redemption penalty

dimbo61

Reduce the term and you dont have to pay ERC chrages

getmore4less

marc-h wrote: »

I currently have an interest only mortgage that allows over payments (which I think the majority do) as I like the flexibility this offers. Is there any point ever taking a repayment mortgage where the amount you pay off the capital is set for you? With interest only I can make overpayments as and when I like, every month if I want to make it the same as a repayment. If I am short I can go for years without paying any capital off and then catch up.

Is my understanding basically correct or is there some huge catch that I will discover in 20 years time!?

marc-h wrote: »

I'm still at the stage were due to my age I expect my future earnings to be higher than they are now. That is why we initially went for interest only. It keeps it manageable now and then we can start making larger payments in future years. Although we are already managing to save more than we expected so may be able to make overpayments already. Just need to keep the rainy day fund at a reasonable level rather than all tied up in the mortgage.

You are betting on future income.

Have you actualy done the numbers.

eg original 20 year term say 5% you leave the capital payments for a number of years, note the 0% payments

£417 20y interest only £0
£660 20y repayment £417
£791 15y repayment £556
£1061 10y repayment £834
£1888 5y repayment £1667