What is the best option with our mortgage?

moments_of_sanity

Good Evening All

We are now in a position where we can pay off £69,000 from our mortgage leaving us with £31,500. We are currently on an interest only mortgage and would now like to start overpaying what we have left.

Are we best to put this back to repayment or leave it as interest only?

Mortgage payment interest only £212.00
Mortgage payment repayment only £340.00

Interest rate is 6% and we can pay up to £500 per month without penalty. What is the best option?

Thanks for reading :j

Farmerbob

I would leave it interest only and make overpayments each month by SO, that way your save on having to pay the fee to covert the mortgage over to repayment.

moments_of_sanity

The cost of changing it over is £50, do you think it would be worth changing for that price - seems quite low and I then know that each month the mortgage amount we owe is coming down?

Thrugelmir

Switch to a repayment basis.

In addition make the maximum allowed overpayment of £500.

You'll find it impossible to earn 6% on your savings.

Are you on a fixed term product currently?

ViolaLass

moments_of_sanity wrote: »

The cost of changing it over is £50, do you think it would be worth changing for that price - seems quite low and I then know that each month the mortgage amount we owe is coming down?

If you overpay on an interest only mortgage, the amount you owe will also come down AND you'll save £50.

moments_of_sanity

Thrugelmir wrote: »

Switch to a repayment basis.

In addition make the maximum allowed overpayment of £500.

You'll find it impossible to earn 6% on your savings.

Are you on a fixed term product currently?

Unfortunately we are tied in until September 2017 and will have to pay a penalty to reduce our mortgage down to £31500 but not sure how much it will be. Percentage is 6.99%

Thrugelmir

ViolaLass wrote: »

If you overpay on an interest only mortgage, the amount you owe will also come down AND you'll save £50.

If the mortgage is switched to repayment. Then it is possible to make capital repayments every month as part of the normal repayment, and in addition pay an additional £500.

At an interest rate of 6.99%. Bringing down the capital balance owed by any means makes financial sense.

ViolaLass

Thrugelmir wrote: »

If the mortgage is switched to repayment. Then it is possible to make capital repayments every month as part of the normal repayment, and in addition pay an additional £500.

At an interest rate of 6.99%. Bringing down the capital balance owed by any means makes financial sense.

Assuming the OP has that amount of money available each month, yes. But if they don't then there's no point paying the £50 to switch.