Making overpayments on interest only

Constantine67

Hi

We are currently on an interest only mortgage. Like many others I guess we had this as a temporary measure. The plan was to switch to a repayment. As we are in our early fifties we are worried that being self employed we are limited. On top of this we have just started a DMP so obviously switching is not possible for years.

However we have been paying an amount for several years as a capital overpayment.. so in theory if we do this its kind of a way of having a mixed repayment/interest only mortgage?

We plan to increase our payments eventually to start paying off rather than just treading water.

I'm just wondering if anyone else is doing this? It seems a good idea if you have a low interest only mortgage which we do and can afford to make overpayments.

HappyMJ

Constantine67 wrote: »

Hi

We are currently on an interest only mortgage. Like many others I guess we had this as a temporary measure. The plan was to switch to a repayment. As we are in our early fifties we are worried that being self employed we are limited. On top of this we have just started a DMP so obviously switching is not possible for years.

However we have been paying an amount for several years as a capital overpayment.. so in theory if we do this its kind of a way of having a mixed repayment/interest only mortgage?

We plan to increase our payments eventually to start paying off rather than just treading water.

I'm just wondering if anyone else is doing this? It seems a good idea if you have a low interest only mortgage which we do and can afford to make overpayments.

I would prioritize making the mortgage repayments over that of the DMP.

I would be ringing the bank and getting them to set a term that would expire on your expected retirement date and then start making those higher payments.

If you retire before paying off the mortgage you could at some point find yourself needing to sell and move to clear the outstanding mortgage.

That would mean reducing your DMP payments so you can pay your mortgage off with your last pay packet before you retire.

The DMP can wait.

Constantine67

Thanks for the reply. Our mortgage is £144000, What I forgot to mention its highly likely that in the future we will be left anything from £50000 to £70000+, so we will be using this to make a large capital repayment which should then bring things into an easier manageable amount

Delete33

I am overpaying £250 per month, £70,000 to clear in the next 6 years, I will be throwing every penny at this Mortgage including lump sums when I can.

getmore4less

Constantine67 wrote: »

Hi

We are currently on an interest only mortgage. Like many others I guess we had this as a temporary measure. The plan was to switch to a repayment. As we are in our early fifties we are worried that being self employed we are limited. On top of this we have just started a DMP so obviously switching is not possible for years.

However we have been paying an amount for several years as a capital overpayment.. so in theory if we do this its kind of a way of having a mixed repayment/interest only mortgage?

We plan to increase our payments eventually to start paying off rather than just treading water.

I'm just wondering if anyone else is doing this? It seems a good idea if you have a low interest only mortgage which we do and can afford to make overpayments.

The reality is you have been borrowing money from others to pay capital off the mortgage debt and now are in a DMP.

You can't afford the overpayments without defaulting on your obligations to others.

Obviously while the other lenders are not charging interest you pay any spare cash off the interest bearing debts.

Constantine67

getmore4less wrote: »

The reality is you have been borrowing money from others to pay capital off the mortgage debt and now are in a DMP.

You can't afford the overpayments without defaulting on your obligations to others.

Obviously while the other lenders are not charging interest you pay any spare cash off the interest bearing debts.

Thanks for your reply.

Couple of things though

1. We did not go into a DMP because we were overpaying in our mortgage as you have stated. We have been paying a small amount for years and have never missed a payment. Our DMP is from credit card debts. Just because we have a DMP does not mean we cannot pay our mortgage. that is not why we are in a DMP!

2 as I also stated we will have a good amount in years to come to make a capital repayment which we will be able to afford

Thrugelmir

How long does your mortgage have to run? While paying down the mortgage at the expense of the mortgage is financially attractive. Your options may be very limited to remortgage or extend the term if the DMP still exists. As lenders will see where you've prioritised. As the saying goes you can't have your cake and eat it.