Mortgage Overpayments

catkin1508

Hi
Im wondering if anyone can answer a few questions for me- We are currently with Capstone Mortgages(groan) we are on an interest only mortgage and are on there SVR so our mortgage payments have halved- are we able to continue making the same mortgage payments as our fixed period to make a dent in the actual capital??I have seen elsewhere that it might be better to make a savings plan and then make large lump sum payments off of this.
Another option i thought of is if we are able to switch our mortgage over to a repayment mortgage?? Any help would be most welcome as i we are unable to remortgage at the moment as we dont have enough equity in the house so am hoping to make a dent in the original loan whilst the interest rate is low to try and get us ahead
Thanks in advance

opinions4u

Have you rung them to ask?

dimbo61

You dont give the SVR you are on but if you have paid say £600 a month for the last 3 years and can afford that then ring them and ask can you keep the mortgage payment static ! therefore overpaying each month

blueberrypie

catkin1508 wrote: »

Hi
Im wondering if anyone can answer a few questions for me- We are currently with Capstone Mortgages(groan) we are on an interest only mortgage and are on there SVR so our mortgage payments have halved- are we able to continue making the same mortgage payments as our fixed period to make a dent in the actual capital??I have seen elsewhere that it might be better to make a savings plan and then make large lump sum payments off of this.

Generally when you are on SVR you can make any capital payments/overpayments you wish. Check with your lender to confirm this is the case.

It used to be that some mortgages calculated interest monthly or even annually - i.e. if you made an overpayment, your money simply sat there with the lender, doing absolutely nothing for you, until the next time interest was recalculated. In those cases, it made sense to save the money, earning interest, until just before the mortgage interest was recalculated.
But now almost all mortgages have interest calculated daily, so the sooner you make extra payments, the more you benefit from them.

However we live in interesting times, and many people are finding that the interest rate on their mortgage is lower than the after-tax interest rate they can achieve on savings. For example, if your SVR is 2.5% and you can earn over 3.2% on your savings, it is better to save until such times as the mortgage interest rate is higher than the possible savings interest rate - at which point you would take your savings and put it towards your mortgage.