Do I have to alter interest only mortgage after cashing in endowment?

sarahe

Hello
Just a quick question. Cashed in my endowment - cashed in ISAs and paid off as much as we could afford on our interest only mortgage. Still have a balance of £12,000. Mortgage still has 11 years to run.
Do I have to convert it to a repayment mortage? Do I need to formally tell the mortgage company what I have done? I did say I was cashing in the endowment over the phone but the young girl just said okay.
I was thinking to carry on paying the interest and each month paying off as much as we can.
We have a tracker mortgage 1% above the base rate and do not incur any penalties for paying off bits.

What do you reckon?

dunstonh

You dont have to change to repayment and you dont need to tell the lender what you have done. It is your responsibility to repay the mortgage at the end so you decide how you are going to do it.

EdInvestor

sarahe wrote: »

I was thinking to carry on paying the interest and each month paying off as much as we can.We have a tracker mortgage 1% above the base rate and do not incur any penalties for paying off bits.

This idea suits many people more than switching to repayment as it gives you flexibility in case anything goes wrong ( redundancy, relationship breakdown, illness, whatever).You can just stop overpaying for a while. Repayment is more sensible for people who lack the self discipline to overpay.

You could consider increasing your monthly mortgage payment by the amount of the endowment premium, so that the loan gets overpaid every month automatically with no change in your outgoings. You could then add in more when you have other spare cash.

sarahe

Thanks for the advice both of you.
I think we will keepit the same - each month we are goingto see what we have 'surplus' and pay it off. If we're careful it should only take a few years. Then we can start again ......

JoeK_3

sarahe wrote: »

Thanks for the advice both of you.
I think we will keepit the same - each month we are goingto see what we have 'surplus' and pay it off. If we're careful it should only take a few years. Then we can start again ......

You should check on how your mortgage interest rates are calculated by your lender, i.e. Annual, Monthly or Daily rest, as someone who is everpaying on the mortgage should ensure that they get the benefit of any over payment immediately on interest charged on the reduced capital outstanding.

JoeK