Mortgage Overpayments

DollyDimple58

Hi I took on a £90k mortgage about 18 months ago on a 2 year fixed rate. This rate ends at the end of July and after this time there are no penalties for overpayment. The mortgage is in two parts £36k repayment and £54k interest only. It is only a 10 year mortgage term so not that long. At the moment i have managed to save up quite a sizeable amount of money and was going to make an overpayment to try and reduce the repayments when the rate goes up in August when i come to the end of my fixed term. My question is am i better off paying a chunk off the repayemnt element or off the interest only element or both or neither?
I would be grateful for any advice?

JimmyTheWig

Are they (or, at least, will they be after July) both on the same interest rate?
If so, it makes very little difference.

getmore4less

Why not pay the max allowed without penalties now?

DollyDimple58

Was thinking that since it is only 5 months away it might not be worth the hassle but think i might look into it now you have mentioned it. Thanks

DollyDimple58

Yes after July both rates go to 5.98% i think. Does this make a difference then?

DollyDimple58

Just read last line of your reply. If it does not make much difference do you think it would be worth seeing if i can get a better deal with a different provider and switch?

JimmyTheWig

Sorry, maybe I wasn't too clear.
My point was that it makes very little difference what part of the loan you make the overpayment against.

Making the overpayment itself will make a huge difference. If you've got the cash now then for the sake of a phonecall you may as well pay off what you can now, then pay off the rest as soon as allowed.

5.98% sounds very high in these days of low interest rates.
Definitely worth seeing if you can get a better deal, either with the same mortgage company or elsewhere.
What is your credit rating like?

getmore4less

DollyDimple58 wrote: »

Was thinking that since it is only 5 months away it might not be worth the hassle but think i might look into it now you have mentioned it. Thanks

What hassle?

for each £10k and 1% of interest thats £8.33pm
if you have the deatails max alowed and account you could transfer, if not a short phone call.

Seems like a good potential hourly rate to me.

DollyDimple58

My credit rating should be very good i would think.

DollyDimple58

Sounds like i need to take some action. Thanks for your advice.

JimmyTheWig

In that case if it were me, I would...
1. Pay off as much as I could without penalty as soon as possible.
2. Start looking around in the next few months with a view to moving your mortgage to a different company in July or getting a new deal with the company you are with in July.