Repayment or Interest only mortgage?

Narla

I have approx £55,000 on my mortgage which will take another 15 years to pay off. Someone has suggested putting it all on an interest only mortgage and then making overpayments each month so that in the capital is paid off as in a repayment mortgage.

I'm strugling to understand the benefits of this and whether this would be in my best interest or not.

Any advise welcomed.

Thanks, Narla

wv6jd

Hello there,

The only way I can see the benefit of having a repayment mortgage and then using overpayments to pay the capital, is if you are on an extremely tight budget and an unforeseen circumstance would allow you to cancel the overpayment and maintain your bills.

If you are comfortable paying both the interest and the capital, then i would recommend sticking with a repayment mortgage as at least then you know the mortgage is getting smaller.

Taking it on interest only would really only suit a first time buyer who can't commit to the full payments each month.

All the best.

cw18

Our Building Society won't allow us to convert to interest only UNLESS we can either prove we have repayment vehicle in place OR the property is worth at least £150,000 more than the total mortage.

And I was told this only last Thursday, 'cos we're about to have to claim for benefits to pay the mortgage which will only cover the interest. As we'll only be on what the government says we need to live on, finding the £100/month for the repayment part as well as the premiums on our endowments (we're currently part repayment/part interest only) and DTA just isn't a viable option.

But our property is only worth about £115k more that the total mortage, so they won't allow it -- which means unless we can find something else to stop paying (or stop eating) they're going to start claiming we've defaulted in the next couple of months !!!!!

*Louise*

Narla wrote: »

I have approx £55,000 on my mortgage which will take another 15 years to pay off. Someone has suggested putting it all on an interest only mortgage and then making overpayments each month so that in the capital is paid off as in a repayment mortgage.

I'm strugling to understand the benefits of this and whether this would be in my best interest or not.

I was recently advised to go with an interest only mortgage, (I was looking for 60%) but rather than making overpayments of say, £100 a month....to put the extra in an ISA at almost 6% interest, then when my fixed rate runs out in 3 years use the money, plus the interest to take a chunk off the mortgage then.

It's not all that much extra really- but every little helps.

Dan_Collins_2

Interest only with an investment is fine as long as the investment makes what it is meant to. If it does not your in trouble. I believe that interest only is bad advice when a residential mortgage, well 90% of the time.