Capital repayment on interest only mortgage

Thrupnybit

Mortgage currently part repayment and part interest only. The repayment part should be cleared by a lump sum payment very soon. With the remainder of the mortgage (c£29K) which is interest only, is it better to leave it as it is and continue making repayments at the current level or convert part to repayment? Either way, am I right in thinking that the overpayments reduce the mortgage term? Mortgage term is just under five years currently and I'd really like to clear the mortgage sooner.

TrickyDicky101

Repayments will only reduce the mortgage term if they are of a sufficient level to ensure complete repayment of the oustanding capital balance withn your current mortgage term. Otherwise, at the end of your term you will simply be left with a lower remaining mortgage balance to pay off.

Do you have an alternative repayment vehicle in place (eg ISA, endowment etc) or would you lke to fully pay off your outstanding mortgage balance over the remaining term?

If the latter, what is the current rate of interest you pay and what is the exact remaining term?

Thrupnybit

Sorry mixed up dates there. Mortgage term is May 2019. There's an endowment policy in place maturing 21 August 2017, projected value at lowest rates is £16K. (Also have ISAs) So clearing the remaining £13K as soon as possible would be priority. Current, variable, interest rate is 2.5% with no penalty for overpayments. Monthly payment is £210 (inc mortgage protection which is under scrutiny too) and currently overpay £100 each month.

As I type, I'm wondering if using some of the ISA now would make sense (3.25% Nationwide, rate ending in September).

TrickyDicky101

As you are earning more on the ISA than the mortgage is currently costing (3.25% ISA rate vs 2.5% Mortgage rate) then it makes sense to keep the ISA going. If in the future the mortgage rate rises and/or the ISA rate drops you can revisit the question and potentially liquidate the ISA to pay off against your mortgage.