Interest only - make overpayments or change to repayment?

heathy_2

Sorry for the confusion, wasn't sure what repayment plan meant. We haven't got a separate savings plan/policy. What we do have is life insurance policies with BUPA and fortunately as we both work in the public sector we both get death benefits of 4x annual salary each, so would rely on that paying the mortgage off.

Going to sort out mortgage paperwork to check follow on rates and will post again later.

Many thanks for all your comments and advice so far!

devildog

My thoughts on this would be to switch to an off set mortgage account. This way you will be repaying but the money will still be available if required.
We took this option due to being advised that endowment would not be enough to pay off mortgage at the end of the term. I wish we had done it years before

getmore4less

devildog wrote: »

My thoughts on this would be to switch to an off set mortgage account. This way you will be repaying but the money will still be available if required.
We took this option due to being advised that endowment would not be enough to pay off mortgage at the end of the term. I wish we had done it years before

Probably NO chance the OP can change to anything.

it's a NR interest only together mortgage so most likely over 100% LTV.

shortchanged_2

heathy wrote: »

Sorry for the confusion, wasn't sure what repayment plan meant. We haven't got a separate savings plan/policy. What we do have is life insurance policies with BUPA and fortunately as we both work in the public sector we both get death benefits of 4x annual salary each, so would rely on that paying the mortgage off.

Going to sort out mortgage paperwork to check follow on rates and will post again later.

Many thanks for all your comments and advice so far!

I don't think these actually count as a repayment vehicle as one of you will have to have died before any payment would be paid out!

So if your mortgage is due to complete when you are 60 for example and you are both still alive, what are you going to use to pay off the capital?

I think you really could do with some proper financial advice.

HappyMJ

shortchanged wrote: »

I don't think these actually count as a repayment vehicle as one of you will have to have died before any payment would be paid out!

So if your mortgage is due to complete when you are 60 for example and you are both still alive, what are you going to use to pay off the capital?

I think you really could do with some proper financial advice.

That's why NR went under isn't it....Selling interest only 100%+ mortgages with no repayment plans in place. I don't think it's the OP's fault it's just what everyone was doing a few years ago.

If the capital isn't paid then they have the option to continue paying interest only for the rest of their lives, if they no longer have the income then they can claim Support for Mortgage Interest with their Pension Credit from DWP or they can sell the house and move into private rented accomodation. Not something I'd like to be doing when I retire.

getmore4less

HappyMJ wrote: »

That's why NR went under isn't it....Selling interest only 100%+ mortgages with no repayment plans in place.

NO

It was because they lent money long term but only borrowed it short term in the markets and when they could not renew the short term loans they had a problem.

picardygirl

When we had a NR part interest and part repayment mortgage, and wanted to change it to full repayment, we were told by NR they would charge us £75 to change the mortgage to repayment, and we were advised to keep it as it was and just overpay like it was a repayment, so i asked what the full repayment amount would have been and paid that plus a little bit more each month.

So effectively instead of paying the fee of £75 we just paid that £75 off the mortgage instead ........

heathy_2

Paperwork found - details as follows:

Current debt £150,398 made up of £121,649 mortgage on interest-only @ 5.69%, and £28,747 unsecured loan on repayment @5.69%. Payment per month is £750.40, made up of £567.80 mortgage and £187.60 for the unsecured loan.

My 5 year fixed deal ends Dec 2011, when I will go onto NR's SVR currently 4.70%.

I have had a payrise of £200 per month and want to use this to the best advantage.

My questions are: should I stay on interest only and make overpayments, or ask NR to change me over to repayment?

Also, when my deal ends next year, presumably my monthly payment will go down, therefore I could use this saving and increase overpayments?

Thanks for all your help guys, advice much appreciated.

Mrs_Z

Hi

In your situation I would just over pay - unless you can find a substantially cheaper mortage that would warrant changing it. There might be a charge for switching the mortgage and you would be committed to higher monthly payments on the repaymet mortgage. Your monthly payments will go down as you overpay - make sure you make it clear to the lender that the extra payments are 'capital repayments'. Your monthly payments will also be recued once your fixed rate ends in December 2011 as the rater is lower than what you currently pay.

shortchanged_2

Mrs_Z wrote: »

Hi

In your situation I would just over pay - unless you can find a substantially cheaper mortage that would warrant changing it. There might be a charge for switching the mortgage and you would be committed to higher monthly payments on the repaymet mortgage. Your monthly payments will go down as you overpay - make sure you make it clear to the lender that the extra payments are 'capital repayments'. Your monthly payments will also be recued once your fixed rate ends in December 2011 as the rater is lower than what you currently pay.

But isn't that essentially what a repayment mortgage is, with the benefit that you HAVE to stick to the payments instead of being tempted from time to time to not overpay because you need a new tv, car or something else.