interst only mortage best way to start paying some off or saving to pay off?

procrastination_over

Hi we have a mortgage of £107,000 in total, made up of £97,000 from when we purchased (in 2001) and £10,000 we took out extra, a year ago, for home improvements. The 10,000 segment is a repayment mortgage however the £97,000 is interest only and we have nothing in place to pay it off. The reason for this being that 3 years ago I gave up work to have our little girl and we wanted some space financially. So it served its purpose for then.

So now I am back at work part time we want to start thinking about how we aim to pay off this £97,000. Should we just purely ask the bank how much extra it would be for a repayment mortgage? Or are there other options? For example are there ways of saving to pay the £97,000 off in total at the end? I know endowments are no good but are there other things available?
We have an endowment going for £29000 which I have just posted a question about coz I want to sort that out too.
Our house is valued at approx £250,000.

We are tied into a deal with the Nationwide 2 year tracker, which is 0.04% above the Bank of England base rate, until Feb 08.

kingkano

There are other ways such as ISA saving, playing the stock market, etc. But as your mortgage is tracking the BOE rate probably it would be best if you just made capital repayments directly to the mortgage? Note thats just my opinion!

You can either ask them to convert it to repayment, or even just make adhoc payments against the capital (I think Nationwide allows this, ring and ask for sure). The former is better if you lack discipline....

mae

So why would ISA not be best if your mortgage is tracking BOE?

kingkano

mae wrote: »

So why would ISA not be best if your mortgage is tracking BOE?

Usually banks charge MORE than the BoE on mortgages, but pay LESS than BoE on their savings. The difference is how they make their money So alot of ISAs right now will be 5.00-5.15 (BoE is 5.25 currently). A tracker mortgage I'd expect to be about 5.39 or in your lucky case 5.29 So you can see the gap, even though its slight in your case.

The other difference would be they usually increase the lending rate quickly, the savings rate is slower to 'track' if it does at all. :rolleyes:

JoeK_3

mae wrote: »

So why would ISA not be best if your mortgage is tracking BOE?

Mae, have you not posted in another thread about endowment shortfall compensation claims?

JoeK