Please advise on Interest Only Mortgage!

loisebony

Hello...need some sound advice...some background..
Single parent....working for NHS.....Have an IO mortgage....on £112,695
2 dependent teens.....no support from exH
Have 15year mortgage....nothing in place to repay ...(please don't condemn me...was only way and bit of bad advise to get myself and boys a home)
£50,000 equity....
I dont have huge debts...£3000....slowly paying off....
I have a lodger...
Mortgage with Santandar...3.99% fixed for 3 yrs...
I want to overpay...
Is it best to overpay in one big chunk or monthly.the least I will pay is £200 but hope to do more...My annual review is October....
I know I wont repay mortgage in 15 years and will have to sell...Live in Wiltshire...3 bed terrace....
Just want to do what i can...I'm fortunate that plenty of work for me and always will be ...can't retire until 67.......
I haven't gone over to repayment for fear of having a crisis and not being able to afford mortgage....
Please advise...
Im 54...this year......:)

Cornucopia

The more you over-pay now, the less interest you will pay on the remaining loan. Ideally, you would increase monthly payments and make lump sum payments to maximise your equity at the end of the mortgage term.

Do you have a pension that might help pay off the loan? Can you extend the mortgage to your retirement date?

ACG

The sooner you overpay, the sooner interest stops accruing. So from that perspective its probably best to overpay the lump sum if you are doing it straight away. Otherwise if you are planning to save it up and then overpay, i would say paying monthly is the better option.

Your other debts... what interest rate are they on? It may be worth paying them down first if they are on a higher interest rate.

betmunch

Theres something wrong with your keyboard, the full stop button seems to be stuck.

Anyway I echo what the others have said overpay as soon as you can as that will make the biggest difference.

Also, I dont think it was bad advice to take IO. But thats probably an argument for a different forum!

loisebony

Hi
Nothing wrong with keyboard...just like full stops!
Yes agree bad advise about IO....but that's life !
Yes I have a pension...
So do I overpay monthly or save and do it annually? Will it make any difference? I can overpay by 10% annually ..
Can overpay by £200 monthly but hopefully more...not easy when a single parent but just want to do what I can..

Thanks for replies..:)

loisebony

Betmunch...
Sorry I re read your post saying it wasn't bad advice iyo to take out IO mortgage...
Why?

ACG

If you were on repayment mortgage now, your payments would have been far higher than they are now. So you may have been in a position of not being able to make the payments and have to sell up?

I might be wrong as i dont know anywhere near enough, im just playing devils advocate.

loisebony

yes true...

betmunch

loisebony wrote: »

Betmunch...
Sorry I re read your post saying it wasn't bad advice iyo to take out IO mortgage...
Why?

You said it was the only way to get a house for you and the kids. Therefore it is reasonable to assume you couldnt afford repayment, or you would have done it.

Over the 15 years you will have owned the property the value is likely to increase (not guarenteed, but likely). when you sell at the end of the term if you cant pay off the mortgage then you will get this money for yourself, if you rented then you would get nothing in 15 years.

I expect you are paying less per month on your mortgage than you would in rent for the same size property right now.

I could go on, but I wont.

My mortgage is IO and I wouldnt have it any other way (at least not until I am forced to change it) as a responsible borrower I know what I need to do when it matures.

IO mortgages are only bad if you do not know/forget whats going to happen at the end of the term.

Perelandra

I believe that the minimum overpayment you may find you can make is £500 at a time, rather than the £200 you mention. That was the case with me when I had a mortgage with Santander. This may dictate the pattern of your overpayments.

Like betmunch, I also have an IO mortgage, and wouldn't have it any other way.

Thrugelmir

Clear your other debts first. Then overpay the mortgage as and when you can.