Mortgage overpayment advice

petragog

I have a mortgage which is half repayment and half interest only (the interest only portion is coverd by an endowment policy with a £5000 predicted shortfall). I am in a position to make overpayments of a substantial amount per month and the building society will allow me to do this. Question: is it more cost effective to overpay on the interest only or on the repayment portions of the mortgage (disregarding the ability to pay off the endowment shortfall) ?

TrickyDicky101

Assuming that both interest-only and capital repayment portions are charged at the same interest rate then it makes no difference which you choose to overpay.

DVardysShadow

Agree with what TrickyDicky says as far as financial efficiency is concerned. But from the point of view of knowing the road to having it all paid off, it is probably better to pay down the interest only portion and start covering the £5000 shortfall. Otherwise if you pay down the repayment part the consequence will be that your repayments are reduced, but if you stop overpaying [and perhaps interest rates change], your shortfall will remain at £5000 you won't have a clue as to how much you ought to pay to cover it.