Interest only - paying off yearly

jpbeautybabe

This thread has probley been asked before but can't find it so was wondering if you guys could advise me.
Want to go interest only for a while and while hubbys paying interest I will be putting money into seperate account every month, so question is when I pay off lump sum at end of the year do the banks usually charge for doing this? Also has anyone got any good tips where to invest this money for paying off?

CLAPTON

it depend upon your specific mortgage .. e.g. a fixed interest mortgage may not allow overpayments or charge a fee but just ask your mortgage provider.

why are you going interest only if you also aim to save .. generally you are paying a higher rate of interest on the mortgage than you receive on the savings so its not a cost efffective way of paying the mortgage off.

jpbeautybabe

Its a tracker mortgage. We're going interest only as my husband is self employed and is a worrier so I'm trying to take some stress away from him.

plane_boy2000

I am and advocate of IO mortgages - it has worked really well for us when our children were being born and enabled us to get the big house we needed when we needed it. Now things are a bit easier we can pay more off as we have it, and of course our incomes have increased as well.

You will need to check with your lender what their terms are - I am with Bank of Scotland and they calculate interest daily and allow me to overpay my IO mortgage by up to 10% of the outstanding balance each year. I am nowhere near being able to pay back 18K a year, however I am managing to overpay some each month so my balance is reducing. They recalculate my payments each year to reflect anything I have overpaid, but I always keep paying the same so this also helps.