Overpaying Capital on Interest Only or Switch to Repayment, Help!

confused_kid

Hi, sorry new to this so apologies if i've posted this in the wrong place...question about overpaying mortgage.

I have a 140k Mortgage on variable rate - interest only, currently paying approx £300 p/month...

Later this year my situation should change so that I can either switch to repayments or continue making the interest only payments but also reduce the capital of 140k each month by paying an extra £200-300 p/month...

Now, for the next say 3-4years is it better to make these one off payments every month (providing lender allows) or switch to repayments...I would expect to overpay approx £3k p/year for the next 4 years say, meaning a reduced capital from 142k to 130k.

Question is, will I have reduced it by 12k by moving to repayment? (Understand everything is just an opinion,and this is very crude, and doesn't take into account a whole host of factors - interest rates etc)

Thanks in advance for your help:beer:

originalmiscellany

It doesn't really matter where your money is - paying off the mortgage with a repayment mortgage, or sitting in a high interest bank account if it's offset.
As long as in say a few years time, you have the money saved, you can choose whether you want to pay off the mortgage or continue saving elsewhere.
I'd say (I'm risk averse) it'd be better to clear the mortgage with repayment, although the other option is available to you. As long as you're capable and willing of saving to clear your debts how you get there doesn't matter as long as your savings are working hard for you.

dollarsense

Yes if your savings are working for you it doesn't really matter the method you use.

confused_kid

Old thread resurrection here

Just to update and ask a question...for the past year I have been making a capital repayment on my interest only mortgage. Details are that it is with Mortgage Express on a SVR of 2.5%...interest only payment is £294, and we are paying £600 in total, so £306 as a capital repayment each month.

Mortgage is down to somewhere near £138k from 142K this time last year, but what I want to know is whether there is a calculator I can use to see how much I would've repaid had I chosen to go to a repayment mortgage? Any idea?

We could probably afford to pay more towards the mortgage but currently trying to save up for a house to buy tail end of next year, and intention is to keep our current place and rent it out.

Just want to see what the difference is between what i'm doing now compared to what repayments would've meant, as I have the option of switching.
Thanks in advance for any advice, however small.

confused_kid.