Only paying Interest Only - Is this really bad?!

mindysouthern

Just as a guide, if I pay a small £25.28 extra a month I will take 2 years and a whopping £11,376.63 extra off my mortgage!

So good I think I'm gonna take my own advice and set up an over payment!

Go to http://www.quote-engine.com/mortgage-overpayment-calculator.html to check out what you could save, even if you stay on Interest only and set up an overpayment you'll see a difference! (think this calculator will work if interest only but not exactly sure will give a guide at capital repaid!)

comping_cat

Thats a great caculator, thanks mindysouthern!!!!!

kankan_2

Wow - what a knowledgeable and supportive bunch of people! Thanks for taking the time to offer your advice! :beer:

Just to clarify - the £400 extra does get spend - I shouldn't have called it 'spare'!! Whoops! We aren't extravagant by any means but you're right - I don't know exactly where it goes. I have therefore purchased MS Money (there goes £15!) and have decided to keep an exact track for 1 month before setting up a ruthless budget to stick to.

I now have a meal planner - hopefully will save £50 + on monthly supermarket costs

I have reviewed my outgoings and made cut backs such as changing our life assurance & car insurance & gas supplier.

When I go back to work I will definitely put all the money I earn after paying out for childcare into the mortgage. That mortgage overpayment calculator is amazingly incentive!

And last but not least, I just used vinegar to de-scale the kettle!!!!! (It worked brilliantly!).

Thanks guys. I will keep at it and who knows... might even be able to offer advice myself soon enough!! :T

x

missk_ensington

If you can afford to pay more then that's what you should do, but don't officially change it to Repayment, why don't you keep it as Interest Only as far as your lenders concerned, but pay it back at Repayment rate as though they are the terms. Therefore, you have a Repayment mortgage with the option of paying the IO lower rate on months when cash is tight like Xmas and things.

Thats something don't understabnd, why doesn't everyone do this?

jamesd

Some people like the element of compulsion, others may be on a mortgage that doesn't allow overpayments, or not enough.

I agree with your view that interest only and optional, but routine, overpayments is a good choice.

missk_ensington

If a mortgage is Interest Only surely they MUST allow overpayments, otherwise how would you ever reduce the capital??

jamesd

With no overpayments you reduce the capital at the time originally envisaged: the day the mortgage ends and the whole sum becomes due. By then for a 25 year term the capital would be equivalent to a little under half its value in today's money, assuming a 3% inflation rate. Or you reduce the capital by remortgaging and applying any savings then.