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Overpayment Question
stuartm
Posts: 78 Forumite
This is probably an easy one but I'd like to get some view on whether I'm maximising my benefits with the following please.
I have a mortgage which is £115k, of which approx £70k is interest only and the remaining £45k on repayment. It's a 5 year fix at 2.39%.
There are 7 more years left to run on the mortgage which is approx when I plan to retire.
I have some savings I'd like to use to overpay right now and can overpay up to £11k without penalties.
Is it more efficient to overpay the interest only part or the repayment part or the mortgage, assuming (as I will do) the monthly payments remain the same?
My gut feel is to reduce the interest only element, but it may be better to overpay the repayment part. I have other funds available to clear any remaining interest only mortgage debt in 7 years time though at the moment I prefer not to commit funds to the mortgage (and can't overpay more than approx £11k per year).
Any advice appreciated!
Thanks.
I have a mortgage which is £115k, of which approx £70k is interest only and the remaining £45k on repayment. It's a 5 year fix at 2.39%.
There are 7 more years left to run on the mortgage which is approx when I plan to retire.
I have some savings I'd like to use to overpay right now and can overpay up to £11k without penalties.
Is it more efficient to overpay the interest only part or the repayment part or the mortgage, assuming (as I will do) the monthly payments remain the same?
My gut feel is to reduce the interest only element, but it may be better to overpay the repayment part. I have other funds available to clear any remaining interest only mortgage debt in 7 years time though at the moment I prefer not to commit funds to the mortgage (and can't overpay more than approx £11k per year).
Any advice appreciated!
Thanks.
1
Comments
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As the rate is the same, I can't see any difference.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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On the interest paid (or saved) that's true. Just wondering if, by choosing to overpay the repayment part and keeping monthly payments the same, the repayment part is cleared faster, making additional savings beyond the interest alone?0
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No. It's the same.0
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At least by reducing the amount owed on the interest only part. You'll have a clear idea as to your final objective.0
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