Overpaying Part Interest Only, Part Repayment Mortgage

staffie1

Mortgage balance £66,000, of which £23,000 is on a repayment basis. Halifax SVR 3.5% applies to the whole mortgage.
There are 13 yrs left and I have a stocks & shares ISA to cover the original amout borrowed, £43000 on maturity. This is currently on track.

I have spare cash at the end of each month, and I want to use it to reduce my mortgage.

My question is, do you think I would be better off moving the whole mortgage onto a repayment mortgage (would I have to be locked in for a period?) or continuing with what I have and overpaying? I'm on the SVR and Halifax have told me I can overpay as much as I like, when I like.

If I overpay my current mortgage, can I choose how the overpayments are applied?

I don't want to change my current monthly repayment - I want to overpay as much as I can afford.

Any views appreciated.

kingstreet

Converting the whole mortgage to repayment would only generate lock-ins if you changed products. If you stay on SVR you can pay what you want, when you want.

I can't see any great benefit in switching the account to repayment as the current "ad hoc" arrangement seems to suit you. All it would do is increase your contractual payment which may not always suit you.

What do you mean about choosing how your overpayments are applied? You want to overpay the interest-only part first?

If so, you'll have to ask Halifax how their system copes with that.

staffie1

Thanks kingstreet. In terms of how the overpayments are applied, I was just wondering (if it is possible to choose) which would have the biggest impact - overpaying the interest only part or the repayment part. In fact I can't get my head around whether overpayments on an interst-only mortgage actually repay the capital. I'm confused about that as well!

kingstreet

staffie1 wrote: »

Thanks kingstreet. In terms of how the overpayments are applied, I was just wondering (if it is possible to choose) which would have the biggest impact - overpaying the interest only part or the repayment part. In fact I can't get my head around whether overpayments on an interst-only mortgage actually repay the capital. I'm confused about that as well!

If you overpay the interest-only element, the capital balance will fall and the interest due next month will also fall.

If you overpay the repayment element, you'll have a choice of lower payments next month, or a reduced term in which to pay off the remaining capital.

staffie1

That's good. I'll decide and speak to the bank and see if I can choose. My vision is to repay the whole mortgage earlier and let the endowment run its course as a (higher risk) savings option. If interest rates rise considerably in the meantime however, I'll be able to choose whether a safer bet is a savings account and cash in the endowment earlier.

kingstreet

staffie1 wrote: »

That's good. I'll decide and speak to the bank and see if I can choose. My vision is to repay the whole mortgage earlier and let the endowment run its course as a (higher risk) savings option. If interest rates rise considerably in the meantime however, I'll be able to choose whether a safer bet is a savings account and cash in the endowment earlier.

Sounds like a plan.