mortgage question

john.xs

i have my mortgage with the bradford and bingley.
my interest payments are apparently recalculated each january.
i was wondering if anyone knew how they calculate the %
i ask because i only owe £15 k and it is due to be repaid by 2012
if i paid an amount off in december 2007 would they then just increase the percentage interest to make up the shortfall so they did not lose out.

secondly when you get the money from an endowment to pay off your mortgage has it already been taxed or will this be deducted on maturity

i want to pay a lump sum off mortgage now and utilise endowment for a holiday/treat in 2012.the mrs is worried we may be penalised in some way.
who is right?
hope ive explained myself clearly enough.

benood

I can't give you the answer I'm afraid but why don't you call B&B and ask, I don't think they could arbitrarily increase the interest rate to "make up the shortfall" - if you've had the mortgage for a while you may be able to make overpayments without incurring any repayment charges.

MarkyMarkD

If you are not in a tie-in period, then making payments off your mortgage in December will reduce your following year's repayments pro-rata - i.e. if you paid off £5k of your £15k balance, your repayments would fall by a third.

The only way they would "up the payments to make up the shortfall" would be by charging an early repayment charge if you are in a tie-in period.

john.xs

so is it better to pay 5000 off the mortgage or put 5000 in a savings account?

macca64

Depends what is the interest rate on your mortgage? You need to compare that to what you can earn on your savings.

MarkyMarkD

And depends whether you've got any penalties applying on your mortgage, as I said before.

donstermonster

also depends if you pay Tax on the interest on your savings as well !!!

jamesd

What is the mortgage interest rate? Are you still in a fixed period - there may be penalties during that period but not normally beyond it. They are absolutely prohibited from increasing the interest just to recover lost profit. The interest is also not fixed in amount paid for the whole term, the amount of interest you pay depends on your current balance outstanding at each year or month or day (depends ont eh mortgage type which applies).

Have you used your cash ISA allowances yet this year? What is your tax bracket?

If you are married, what is the tax bracket of your partner and have their ISA allowances been used yet?

greyteam1959

Best bet is to ring B&B
But as far as I know most mortgage lenders will let you 'overpay' your monthly repayments by as much as 20% of the monthly amount. It will vary according to lender but that is what HSBC allow on a fixed rate mortgage.
As far as I am aware there would be no tax of any sort to pay when the endowment plan matures.

john.xs

yep isas full.
think im going to pay it off as unlikely to find other accounts that will have high enough interest
thanks for help

jamesd

That sounds like a good plan now the ISAs are full.