what to overpay on part and part mortgage

moohound

Hi, our mortgage is in three parts

£4000 at 5.9% for a brick garage which I am currently overpaying.

£48000 on interest only which has an endowment with an £8000 shortfall, matures in 8 years, 4.9% interest on this bit.

£45000 repayment at 4.9%

I will have paid off the £4000 by spring next year then I am going to start on the shortfall, and I am wondering what would be best to tackle next, the interest only part and keep some of the endowment when it matures or the repayment part and get the amount owed down, I don't know how to work out what would be better and I want to have a clear plan.

Thank you in advance

Thrugelmir

On the proviso that you able to, over the highest interest part of your mortgage first.

moohound

I have made a start on the highest interest part, its only £4000, was £5000 when we took it out, its what to do next that I don't understand properly. I have put the figures in the calculator, and I think I might be better paying off the interest only part and getting the endowment payout as a nest egg.

The main repayment part and the interest only part are both at 4.9%.

We can't remortgage due to my defaults, so the only way to save money is to overpay.

dimbo61

Well you know the repayment part will be paid off in X years.
The Interest Only one will run until near retirement ? Then just as you want money to enjoy retirement you have to use savings/ lump sum to clear debt.
Both are at the same rate so carry on overpaying

moohound

The interest only part (well most of it) will be paid off in 8 years as well when the endowment matures, it is £8000 short according to the most recent forecast, I will be 51 and DH will be 53.

I intend to pay off the shortfall in this time so we don't have to find the difference.

patanne

Well if it was me, and I'm no expert, I would look at getting a larger emergency fund, at least 3 months (I would prefer 6 months) worth of bills. THEN deal with your shortfall. Then if the interest rates you gave remain unchanged, it doesn't really matter which you pay off next, perhaps whichever may go up first! But your plan seems a good one. I'll subscribe if that is alright with you and follow you on your journey.

moohound

My DH is currently stashing the disaster fund, I was tasked with overpaying the mortgage for now. The shortfall really bothers me, I think its because we keeps getting the red notices saying its not going to be enough

I don't know if there will be much to subscribe to, I am not much of a diarist, but thank you for the interest and encouragement.

getmore4less

Why are your rates so high.

any penalties on overpayments or change in rate due to a rate ending?

What are the full terms of each bit? (and the contractual payment)
what's the endowment payment and surrender value

how much for overpayment is there.

LTV and incomes

moohound

Endowment matures April 2022
Main repayment part finishes Oct 2022

Change in rate - Small mortgage (balance today £4022) at 5.95 finishes Oct 2022 as well, will drop to 4.95 at the end of September so the whole lot will be on the same rate.

Balance today was £90160 with £48000 being interest only.

I have £800 to £1200 (depending on OT) disposable income a month after all bills, fuel and essential spending.

No overpayment penalties on any of it.

No idea what the surrender value would be on the endowment, payment about £100, comes out of an account in husbands name, so can't check until he comes home.

I earn £32000 a year, DH earns £40000, plus very occasional bonuses.

We are stuck with the rate because of my defaults, DH has pristine credit history though. I failed the credit check with HSBC for a savings account, but they did let me open an ISA.

I have been debt free for a while but stuff in our home needed replacing, I needed clothes and we had the drive repaved which cost £3500, we also went to Disneyland this year which was £6000+ so my spare money has gone on that, next year we will revert to camping at £200 for 2 weeks, which I like better to be honest.

It is frustrating because I have never had this much spare money, but I am excluded from so much because of my defaults, I fully appreciate that they were of my own doing and I don't blame anyone else, its just they way things are.

patanne

They are sending red notices because they are obliged to. So many people just keep on and on ignoring them until they get to the day when they HAVE to pay. You are not doing that, you are dealing with it, so you need to stop letting it worry you so much, this is because worry so often undermines our efforts.

kidmugsy

moohound wrote: »

we also went to Disneyland this year which was £6000+

Good grief, you could have cleared the garage debt with that. You're paying 5.9% p.a. out of taxed income. That's the sort of folly that stops you remortgaging.

How much did the Disneydrivel really cost you, I wonder, when you add in those costs? £12k? More?