Offer to capitalise arrears

bandos2007

Hi


We have been making over payments for some time to reduce our arrears which now stand at £2.5k and will take another 3 years to clear. Our mortgage provider has offered to capitalise the arrears which will actually reduce our payment by £80 pm but will mean we will pay more interest. We intend to sell up and move abroad in about 2 years time, so is it worth while capitalising ?

PeacefulWaters

When you say it will cost you more interest I'm assuming the rate will stay the same but you'll be charged interest on the bit of debt that was the arrears over the remaining term.

If I've got that bit right, I'd get the arrears capitalised immediately because this will have a positive impact on your credit file (useful if your emigration plans change).

The spare £80? Use it to clear other more expensive debts and then overpay the mortgage anyway (assuming there are no charges for doing so).

That way you'll save the additional interest costs anyway.

Well done on digging yourselves out of a hole.

bandos2007

Thanks for your reply, and yes we will pay interest on the debt part. We thought it would be best to accept the offer, it does make sense.

CLAPTON

bandos2007 wrote: »

Hi


We have been making over payments for some time to reduce our arrears which now stand at £2.5k and will take another 3 years to clear. Our mortgage provider has offered to capitalise the arrears which will actually reduce our payment by £80 pm but will mean we will pay more interest. We intend to sell up and move abroad in about 2 years time, so is it worth while capitalising ?

can you use the 80 'saved' to make overpayments and so reduce interest overall?