Should I pay off a lump sum?

pinklady16

Hi
We have a INTEREST Only Mortgage (85%) with Platform as this was all we could afford and wanted to get on the mortage ladder. We are on a 3yr fixed rate.

We have inherited 10k and are unsure weather to save this or pay it off the mortgage?

Ideally we would like a repayment mortage but cant afford the monthly payment as it is at the mo.

Would paying 10k off be of any benefit???

Any advice would be appreciated.

Thx B.

Cannon_Fodder

What % of your mortgage is £10k ? It would be that % of benefit.

You will struggle to find lenders to re-mortgage to on a IO basis, when your fixed deal ends.

Platform clients usually have poor credit history. Is yours as improved as it can be ?

Is the reason you cannot afford repayment down to Platform's % mortgage rate ?

You really need to get onto repayment asap. The sooner you do, the better LTV. There is a fair chance you no longer have 85%. To re-mortgage when the fixed deal is up, you need to rebuild your equity.

Are there any overpayment/lump sum, fees/charges/restrictions ?

How about £8k off the mortgage ? Change to repayment and use the £2k to afford the extra monthly amount.

By the time you've spent the £2k, plus the effect of the £8k reduction, you should see a smaller monthly payment and be able to cope without the £2k cushion..??

Get over to the debt-free wannabee forum - even if the mortgage is your only debt - as they can help with economising. Even a small dent in the mortgage now, can snowball in a few months, to make life easier.

Evilm

Absolutely, paying off even £500 on mine brings my monthly payments down £5 per month.

Just make sure that you check that you have no restrictions on overpayments. Ours says no more than 10% in a year, our previous was no more than £500 a month. Both you would incur penalties if you exceeded this as it classed as early repayment.

I would however say to leave yourself a small rainy day fund of £2k or so so you don't end up running up card debt in an emergency.

As for partial repayment mortgage we have ours on mostly interest only and a small amount (about 20% total) on repayment. It makes it easier to handle and any extra funds we have go on the interest only section a bit at a time.

getmore4less

Not enough info

Whats the mortgage rate?
Whats the max overpayment(one off and pm) without charge?

Whats the charge if you pay more than this

Any other debt? what rates?

How big is your emergency/disaster fund

Have you filled your ISAs
What tax rate.