Repayment or Interest Only

Sugarplumfairy_2

At the moment I have an interest only mortgage, this was due to a too good to miss offer on a house and the payments for interest only were all I could afford at the time. Was bursting to get on the property ladder.

I am now moving again and would like advice on whether I should sit with an interest only at the moment, finances arent as strapped as previously but I would still like to live a little, or just jump ahead with a repayment .... payments would be approx double what I am paying now.

I will be putting down approx 75% deposit on my new house. Any advice greatly appreciated as I do not have a clue how mortgages work.

Thanks

Sugar xxx

Gorgeous_George

Are you looking at a 10-year repayment mortgage? To double an interest only at current mortgage rates I estimate you must be.



GG

Sugarplumfairy_2

No .... I was on the C&G website .. who my current mortgage is with and this was over 25years !!!

Sugarplumfairy_2

Think I had better get some mortgage advice before I do anything else (not the brightest bulb in the box ) !!!

Gorgeous_George

Good idea.

For reference, at 6.5% £100K would cost:

£541.67 on an interest only mortgage and
£675.21 on 100% repayment mortgage over 25 years. Rounding up to £700 would knock two years off your mortgage term!

Please, let us know how you get on.



GG

fimonkey

One thing to think about though, is an interest only mortgage that will allow overpayments. Pay the interest mortgage for a year, say you're at 6%, then put the extra amount you were going to pay on the repayment part (i.e. if using Goerges example above it would be £133.54p.m) into a regular saver high interest account (A&L currently have 12% offer). Then at the end of 12 months amke an overpayment on the mortgage. Does that make sense?

Sugarplumfairy_2

Yes that makes sense , then I suppose if there are months when I am a bit strapped I can pay less into the high interest account . Or do I have to pay a set amount each month into this ??

Omg what the hell am I getting myself into ... have no clue whatsoever !!!

Pollycat

Hi
I'm not sure if this will suit you, but we changed our endowment mortgage to the Yorkshire Bank Rapid Repay mortgage.
This is like an offset mortgage and was very new on the market when we switched quite a few years ago, even before the Halifax introduced theirs.

We kept our endowment on and the money will be ours when it ends in 2017.

We paid our morgage up very quickly and were able to afford to retire at ages 50 and 51.
I've been retired for 3 years and hubby for 1.

However, you need to have a certain mindset to cope with this type of mortgage.
It may be worth checking it out to see if it would suit your circumstances.

Polly