Advice needed RE over payment

tinyplanets

Hi All,
We are looking to overpay our mortgage. According to terms and conditions we are only allowed to overpay by no more than 10 percent of the outstanding balance in the month of January. At least this is the case until 2014 when we end our fixed rate terms.

We have approx 35,000 on an interest only (Endowment) basis and about 47,000 repayment.

What are peoples thoughts on which bit would be the best to overpay on. I am thinking that paying the interest only bit off would benefit because if the endowment falls short we wont have to find as much money and if it stays on track we will have a lump sum when it matures. However is there any disadvantages to doing it this way which I am not seeing.

Any suggestions would be appreciated.

Wh05apk

You say you can "only" repay 10% as if you have more than 10% available, if so why areyou asking which part to repay, you can repay both, if you still have funds left, and want to overpay, why not reduce the term down drastically, which will increase your monthly payments, effectively overpaying from where you are now?

Presumably your rate is relatively high, you wouldn't do better using the funds for savings elsewhere?

tinyplanets

Hi, If we overpay more than 10 percent we will be charged about 2,500. This will change but not until 2014.

Wh05apk

tinyplanets wrote: »

Hi, If we overpay more than 10 percent we will be charged about 2,500. This will change but not until 2014.

Yes but how much have you got available to repay, and what rate are you paying?

tinyplanets

We don't have a amount we can allocate as we will both be unemployed from Feb. How much we have available will depend on how quickly or not we can find jobs. We are currently on a 4.89% interest rate.

Wh05apk

Until you get back into work, I would not even think about overpaying, as you will need that money to live on.