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capital payment - reduce payment or term?
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cupofassam
Posts: 6 Forumite
Hi
I have a fixed rate mortgage with ING at 4.95%. I'm not allowed to overpay on it, which I ordinarily do with a mortgage, but I can make capital payments of over £1000, so I save up the money I'd overpay until I have that and whack it in as a capital payment. Now, when I do this I have the option of using the capital payment to either reduce the term of the mortgage or reduce the fixed monthly amount I have to pay, but keeping the term as it is. I presume the first option saves me more money in the long run, but can't do the maths to be sure. Can anyone reassure me? If I continue to pay the same monthly fee as before, then surely I'm paying off even more capital as I do, meaning less interest long term.
Cheers
Mark
I have a fixed rate mortgage with ING at 4.95%. I'm not allowed to overpay on it, which I ordinarily do with a mortgage, but I can make capital payments of over £1000, so I save up the money I'd overpay until I have that and whack it in as a capital payment. Now, when I do this I have the option of using the capital payment to either reduce the term of the mortgage or reduce the fixed monthly amount I have to pay, but keeping the term as it is. I presume the first option saves me more money in the long run, but can't do the maths to be sure. Can anyone reassure me? If I continue to pay the same monthly fee as before, then surely I'm paying off even more capital as I do, meaning less interest long term.
Cheers
Mark
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