Pay off interest only or repayment first?

Wooden_Spoon

Hi,

I have posted this in both here and the mortgage/endowment section sorry but not sure where this should go.
I have a part & part mort with interest only at £30k and repayment mort at £78k - the interest is the same on both. If making an additional payment of £1k which should I choose it to come off? Repayment or interest only.

Thank you.

abouttimetoo

Welcome to the board Wooden Spoon

I was in the same boat as you re having part repayment and part interest only with both parts having the same interest rate. The final decision is of course yours but I decided on making any overpayments to the IO part only as I couldn't bear to not see it come down

Some other thoughts for you that may help

• Will the terms and conditions allow you to make an overpayment and how will they treat it
• what is the mortgage rate and can you get a higher rate for your money by saving it rather than overpaying mortgage
• is your interest calculated daily on both IO and repayment?
• Do you have any other repayment vehicle for the IO part?
• Are you now in a position to make both parts repayment and would it be at the same rate
• Do you have any emergency fund built up
• Have you played with an overpayment calculator
• Is this a one off £1000 OP or do you plan on that level monthly

Best wishes with your decision
Regards
ATT

Wooden_Spoon

Thank you ATT - I have answers to all of the above items that you said I might consider these are 1. I'm allowed to make overpayments up to 5% of total amount 2. The interest is 4.9% 3. Interest is calculated daily on both 4. I have a seperate endowment to cover interest only 5. I can't change to both repayment yet until 2017, 6. The repayment calculator said that I would end up better off to stay where I am as my exit fee is a horrendous amount! 7. I'm going to try and make additional payments (up to the yearly limit) whenever I can but I have been told I must specify which side it is to be deducted from.
I don't think any of the above will or could change my position - what's yr opinion please?! I'd like to here if theres anything obvious I've overlooked. Many thanks

abouttimetoo

Hi Wooden Spoon

Thanks, sounds like all bases are covered and there is nothing obvious that's jumping out at me and as you say, nothing that changes the position

There's no real financial difference if you OP the repayment or IO so, the decision is down to what you feel most comfortable with

Regards
ATT

enthusiasticsaver

If your interest is calculated daily it shouldn't make any difference which part of the mortgage you pay off. We have a part and part and have just paid a lump sum off the interest only element of our mortgage. Your monthly payment will reduce whichever part you repay so I would continue to make overpayments wherever you can.