Current mortgage, stuck in a rutt

debt_collector

Guess I know the answer to my own question, but any advice would be appreciated. I have a mortgage with Cheltenham & Gloucster. Currently I pay £508 p/m 6.25% INTEREST only on a £97000 mortgage, early re-payment of £4000 applies until 2013.Mortgage over 20 years. The current climate if I sold up I would probably only get £95000 for my house. I dont intend to sell,however is there anybody out there that I would get a cheaper/better deal with prior to 2013 or could I change to part re-payment part interest without breaking the bank??? I hear you all scream!!!:mad: Regards ever hopeful

inca_2

You won't get a mortgage with anyone right now if you owe more than your property is worth. If you can afford to either overpay or change to repayment to reduce your debt and get yourself out of negative equity it would be a good idea. It might not take you to where you need to be for a while but it will certainly help in the long run.

Thrugelmir

Are you not allowed to make any capital repayment on the mortgage?

debt_collector

Theres no way I can afford to overpay at the moment. What is capital repayment?? Forgive my ignorance,hence my situation!!

Regards

ILW

Capital repayment is where your payment goes part on interest and part to repaying the capital. Seems to be what you asked for.

phlash

I seriously think we need financial awareness on the school curriculum, so that in 10 years time people are not asking the question 'what is capital repayment'.

When you took out the mortgage, for which you are paying interest only, what did you say when asked how you would repay the capital amount of the loan? (Maybe you weren't asked if it was pre 2007 - some bad practices around) i.e. How will you pay back the £97,000 loan?

Capital repayment means, repaying the loan. i.e. Make capital repayments of £1,000 in a year and at the end of the year you will owe £96,000 not £97,000.

I think it's time that as part of mortgage application processes people sit a short test to ensure their understanding of how mortgages work is sound. Part of the reason for some of the financial mess we are in is ignorance, and part is mortgage companies selling ridiculously leveraged loans to people who simply could never afford them.

inca_2

This isn't a dig at you OP but just an opinion in general. Why is it that when I was at school I had to study Art for 3 years as part of the curriculum yet there was never any compulsory learning about managing finances, savings, basic mortgage info etc etc. I have to agree with Phlash that this really should be common sense to add into the curriculum, particularly considering the financial situation right now. How is that less important than some of the other topics in the curriculum that in the vast majority of cases will never ever be used again?

ILW

Agree with above. It really is a terrible thing that a mortgage holder does not appear to know the difference between an interest only and a repayment mortgage.

Thrugelmir

debt_collector wrote: »

Theres no way I can afford to overpay at the moment. What is capital repayment?? Forgive my ignorance,hence my situation!!

Regards

Others have answered your question.

However I do challenge your statement that you are unable to overpay. As if you really wanted to you could. Even a small amount of £10 to £20 per month to start with. This may not seen much but at least it gets the ball rolling. Use the other MSE forums to find other ways of saving money.