Will I be Charged for paying 80% of my Mortgage off?

hoodedclaw79

Hi

I am looking to pay off 80% of my mortgage(currently 2 years into a 35 year term) but I am wandering if it will just end up paying off interest rather than the bulk of the capital. Any ideas anyone?

N

tanith

You need to check your terms and conditions for penalty clauses .

_Andy_

Have you rung your lender and asked?

dimbo61

You need to read the paperwork carefully and see if you can overpay or pay a lump sum off
Are you in a fixed rate period ?
If you pay a lump sum off you stop paying interest on that amount but you may end up paying an ERC
Please post details of lender and current deal ( I hope its the SVR then you can overpay as much as you like )

hoodedclaw79

Hi ,yes it is a fixed term that is coming to an end in October.Looking to pay it off
in one go rather monthly payments.

nate_dog

hoodedclaw79 wrote: »

Hi

I am looking to pay off 80% of my mortgage(currently 2 years into a 35 year term) but I am wandering if it will just end up paying off interest rather than the bulk of the capital. Any ideas anyone?

N

If you overpay a lump sum then you are paying back the capital you originally borrowed not the interest that it will occur over the next 35 years. The earlier you pay back the original mortgage amount the less interest you will pay.

kingstreet

hoodedclaw79 wrote: »

I am looking to pay off 80% of my mortgage(currently 2 years into a 35 year term) but I am wandering if it will just end up paying off interest rather than the bulk of the capital. Any ideas anyone?

You're thinking mortgage and loan settlements work the same way. Thankfully they don't.

In a loan repayment, you have a figure which is calculated by adding the capital and the interest due over the whole term, then payments made and a discount factor applied depending on how long the loan has run are deducted.

A mortgage is a more straightforward proposition. Once any early repayment penalties applying to a fixed rate or other product have ended, you repay a lump sum which immediately reduces the outstanding capital and future interest*. This can have the effect of reducing the term, or reducing the monthly payment. This is your choice and should be discussed with your lender.

*If the interest on your account is calculated daily, the cost of your mortgage will fall the day after you make your repayment. If monthly, it will take a month to adjust. If you are unlucky to have an account with annually calculated interest, it may be worth saving the money until a few days before the annual calculation date, otherwise your money won't be working for you the way it should.