Overpaying a mixed mortgage

bitstreams

We have a mixed repayment/interest only mortgage with Northern Rock - it's a tracker currently at 2.75%.

We're thinking of overpaying about an extra £100-150 per month, but should we direct this at the repayment portion (about £72K) or the interest only (about £135K) ?

I can't get my head around which would be the most beneficial.

B

Shimrod

If the interest rate is the same on both parts of the mortgage, it won't make any difference. If the interest rates are different, make sure you pay it of the part of the mortgage with the higher rate.

Thrugelmir

How you intend repaying the interest only part?

bitstreams

Thrugelmir wrote: »

How you intend repaying the interest only part?

Selling the house

Thrugelmir

bitstreams wrote: »

Selling the house

Then I would suggest repaying the i/o part as it will focus your attention on the debt.

newyear2011

it should go automatically to the Int only bit as that is the bit that over time is costing you the most as your aren't paying off any capital so the interest remains constant over the term

TrickyDicky101

newyear2011 wrote: »

it should go automatically to the Int only bit as that is the bit that over time is costing you the most as your aren't paying off any capital so the interest remains constant over the term

There's only psychological benefit in doing so (as Thrugelmir suggested) - there is no economic benefit whatsoever in choosing one over the other (assuming they are both charged at the same rate). I'm not saying one should underestimate the psychological benefit though (it's what I would do) :-)