Repayment part or interest only part?

moohound

Hi all,

I have started overpaying on my small mortgage which was for a brick garage and is at a higher rate (5.9) than the the main mortgage (4.9).

I owe £97000 in total, £48000 is on interest only with an endowment shortfall of £8000.

The endowment shortfall was going to be my next target, but what should I do after that, over pay on the repayment part or on the interest only part? I don't know how to work out which option would save the most money.

I cannot get a cheaper mortgage because of my defaults my OH has a pristine credit record though, I have between £800 and £1200 disposable income left each month depending on overtime.

juststuff123

Hi MooHound,

I'm not all that clear on Interest only mortgages with regards to overpaying but I would have thought that you should start overpaying the 5.9% interest part first - General rule of thumb - put your money where the interest rate is higher.

moohound

I have made a start on the 5.9% bit, it was what to do next that I am wondering about. Paying the repayment part would get the debt down, which is always a good thing, but overpaying on the interest only part would free up the endowment when it matures in 8 years, and I would REALLY like a motorhome

I have been debt free for a year now, but a lot of stuff in my house needed repairing and replacing which had been put off while I was clearing the debt, and we have had a new drive done which was £3500 and we spent about £6000 going on holiday, so our spare money had gone on that. Now I want to have a good go at getting the mortgage down.