which part should I over pay - sorry for silly question

cal1_2

Hi
I have 13 years left on a 25 year mortgage. There is (approximately) 50k repayment on a fixed rate at 4.35% for a further 8 years and (approximately) 20k on an interest only basis - currently SVR 3.99%

I wanted to make additional payments - these are unlimited on the interest only part and £499.00 on the fixed rate part.

I was thinking of starting small and paying perhaps £100 per month off the interest only part.

Is this the best way to do it? I realise people might think I'm mad for getting a 10 year fixed rate two years ago, when rates were so low, but i'm a single mum and need the stability and security of knowing exactly how much money I have coming in and going out of the household.

So my question is - which do I pay any extra off - the fixed rate part or the interest only part....

Thanks to anybody who gives their opinion! :beer:

cal1_2

anybody?? lol

do I over pay the fixed rate (because that's a higher interest rate) OR do I pay of the interest only part (and start, at least, making inroads to bring that 20K down)?

Please give me your opinion - what would you do if you were me

LesleyKD

Have you started saving towards the capital on your interest free.? If not ut might be worth contacting your mortgage provider to see if they can offer you any advice or a deal to make it a repayment.

13 years sounds a long way off but it'll soon pass and if you have to pay 20k at the end it might outdo the good efforts of your overpaying

Lesley

getmore4less

£50k @ 4.35% 13y is £420pm

£20k @ 3.99% 13y is £165pm (i/o is £67)

£100pm extra will put you on target to pay off the debt in 13y

I would overpay the higher rate untill rates start to move then review.

at current rates
£520 will pay of the £50k in 10y.
then
£585 will pay off the £20k in another 3y

HappyMJ

cal1 wrote: »

anybody?? lol

do I over pay the fixed rate (because that's a higher interest rate) OR do I pay of the interest only part (and start, at least, making inroads to bring that 20K down)?

Please give me your opinion - what would you do if you were me

My opinion I'd pay off the interest only bit first. Yes it's the lower rate of the two but rates one day will go up. Your fixed rate will be fixed though at a very good rate for the next 8 years.

Make sure you have no other debt and have a small amount of savings invested at the best rates you can find to cover any emergencies.

P.s you are not mad you are smart to fix long term at the lowest rate in history.

Sepa74

I don't know that it really matters for you as the rates are so close, and both options have separate merits as outlined above.

Which will be more motivating for you? Given that security and certainty is important to you, you may be most comfortable paying off the I/o first, as the smaller that mortgage is, the smaller the impact on you when rates do rise.

However if you feel that the amount on the I/o is so low that an increase due to a rate rise won't rattle your finances, then pay off whichever mortgage has the highest interest (at the moment the F/r mortgage).

Why don't you use one of the mortgage calculators in the sticky thread to figure out the impact of a rate rise on the payments of the I/o mortgage. That will give you an idea of whether or not you will feel comfortable with the increased payments when rates do rise. Try it out at different levels - going up in 0.25% increments, as that is generally what the BoE does.

I hope that makes sense

loracan1

I never tire of recommending this mortgage calculator (it's the mse one) As above, there's little in it for the rates they're at and if rates do rise, the IO portion of your mortgage will too - so might be worth getting that one down.


(My mortgage is half and half and I'm working on getting the IO down for the most part)