Getting away from Interest Only

Trents

Hi All, after a bit of advice.

Bought house about 8 years ago for £133,000. Price hasn't change much since. Mortgage is interest only with NRAM(formally Northern Rock).

I really want to start actually repaying the house and have reached a point where I have a bit more monthly disposable income plus £8000 saved up.

Spoke to NRAM who gave me a couple of options:
- Overpay the current amount with the extra coming off the balance.
- Switch to repayment where the monthly rate goes up but interest will pretty much stay the same.

Now I can't see much difference between the two options. I'm thinking of looking elsewhere but doubt I have enough saved to move mortgage to another lender.

Any advice would be great.

egoode

If you switch to repayment you will be locked into that new mortgage payment for a long time. If you choose to overpay you can pay it off your mortgage when ever best suits you. I guess it depends if you think you can afford the higher repayments over a longer period or if you would like more flexibility and just overpay what you can each month which could go up and down depending on your circumstances at the time.

However if £8000 is the only cash savings you have I would recommend not putting that on the mortgage but keep it available incase you have unexpected expenses come up, lose your job etc. You probably don't need to add anymore to that so any other additional money could be put on the mortgage.

Thrugelmir

Start by making overpayments. Whatever you can afford every month. The repayment figure will give a minimum target. So if you are able to exceed this it will greatly speed up repayment.

Leaving the mortgage on interest only will allow you flexibility. Should funds be tight.

If you remortgage then highly likely that you will be required to have a repayment mortgage. So may be worth overpaying for a few months and building equity in your property. In order to have various options available.

Trents

Cheers for the replies guys.

StuC75

the keep as is and make the overpayments to form the repayment element.. There really is no other difference! besides the flexibility of what you choose to pay.

Theres various calculators around that show what you would pay.. All that you may need to bear in mind is how frequently the lender would recalculate your interest charged; so then whether you make monthly \ quarterly \ annual additional payments (obviouslt the sooner you pay the quicker you may notice a reduction in interest charged...