Question with Part Repayment Part Interest Mortgage??

pauljrog

Hi.

I am getting a BTL mortgage for £63,000, part repayment part interest, £40,000 interest and £23,000 capital.

My question is, is it better to make regular yearly overpayments or is it better just put that money in a bank until the end of the mortgage as I will then have to pay £40,000??

What i'm trying to say is if I make overpayments does that pay the mortgage off early with still £40K to pay or do all my overpayments reduce the amount needed to pay at the end of the mortgage??

Cheers for your advice.

Paul.

Thrugelmir

Does your return by leaving the cash in the bank exceed that of repaying the mortgage quicker?

Thats the key to answering your question.

Rednoseranter

It depends on the interest rate your paying on your mortgage against the interest (or growth) you would be earning if you put the money in the bank.

Go with which every is costing or earning you more - in all likelihood it will be your mortgage interest rate that will be higher.

pauljrog

Thanks for your answers guys but what i'm trying to ask is -

Will any overpayments made during the mortgage pay off the interest part of the mortgage which needs to be paid at the end of the mortgage term??

Maybe it's better to do a part overpayment, part savings to ensure the cash is available to pay at the end of the mortgage, or maybe to change the mortgage in a few years time to just a repayment type.

Thanks
Paul

opinions4u

Speak to an accountant.

The tax implications around your business empire are the key here.

Paying more interest may reduce your tax bill by an amount that makes you consider it a sensible approach to things. But there are far wider implications to this so you should get professional advice.

TrickyDicky101

To answer your question though you can probably select which mortgage balance (ie interest-only or capital repayment) you overpay against. You would need to ensure that your mortgage T&Cs permit overpayment with no fees, however.