How to pay off repayment part of mortgage?

bumblestil

Hello. We have a mortgage with about £120,000 remaining on the debt, of which £40,000 is set as interest only due to a useless endowment which I cashed in some years ago (don't bother commenting on that!). The mortgage runs for another 10 years. I make that £334 per month to make up what will be owed still when the mortgage ends.

We are struggling, but just managing, with various other debts too. What I'm wondering is what the pros and cons would be of either 1) paying £334 into a savings account each month to build up the money by the time it is due. The risk here is that some months we probably won't be able to afford it, or may find ourselves dipping into it to cover something else. But we may also sometimes be able to siphon some money off into a mortgage overpayment. 2) changing to repayment with the bank. My worry here is how much that will add to our current mortgage - would it be as much as £334 a month? I am aware the interest would go down over time. But I'm also aware that we'd reduce our overall monthly spending by putting spare money (when there is some) into clearing much higher interest credit card debts - but that won't help clear the mortgage. The mortgage is on a Nationwide base rate tracker from before the crash, so a good low interest rate.

Any thoughts on this very welcome.

Paul

AnotherJoe

If you change to repayment with the bank, that's much more inflexible than IO and overpaying so the latter is really better specially with the low interest rates you are on now.

However, it doesn't sound to me as if you have the ability or determination to overpay (you may be tempted to spend, as you say) and in a way need the rigour of repayment,as witnessed by (1) what you've said and (2) cashing in an endowment and presumably not paying off any of the IO but instead spending it. Bit, if you move onto repayment and run into issues, thats far worse than needing £40k in ten years time. So I say you shouldn't do that but do need to get a plan.

Bottom line is, in ten years time you need £40k. There are many ways you could get that then including having saved it in the meantime, paid part or all of it off, or downsizing.

Perhaps you need a financial makeover looking at your spending, why you have these debts, if the issue is that you are spending too much or not earning enough.

Thrugelmir

Have you considered moving and releasing equity in order to clear your debts? As sounds as if you are on the edge of a financial precipice. Whatever course of action you take currently, will still leave you exposed to an unexpected event. Which will simply make the situation unmanageable.

getmore4less

Moving to repayment how much it goes up depends on the rate.

lower the rate the more it goes up but it will be less than £334.


Hit the high rate debt first

called snowballing

Trying_to_be_good

I'd think get into the discipline of repaying your credit card debt by (at least) £334 per month - you can't then re-divert that money into spending.

As those debts are cleared, including the minimum and any other payments you're making, snowball the money you were using on that into (interest only bit of) the mortgage, and keep an eye on the balance that will be left at the end of the term.