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Overpayment on Interest Only Mortgage
buffness
Posts: 233 Forumite
Hi All,
Please can someone assist me with a query?
I own a rental property that is on a Buy-to-Let Interest Only Mortgage. If I wanted to overpay to reduce the balance, it looks as though any overpayment will go towards the interest amount only - the plan was to try and reduce the balance as best as I can for when the fixed-rate ends in a year and therefore the overpayment chips away at the actual balance - at least then, the balance to mortgage will be less than what it is now... however, I don't think this can be done?
Any advice would be appreciated.
Many thanks.
Please can someone assist me with a query?
I own a rental property that is on a Buy-to-Let Interest Only Mortgage. If I wanted to overpay to reduce the balance, it looks as though any overpayment will go towards the interest amount only - the plan was to try and reduce the balance as best as I can for when the fixed-rate ends in a year and therefore the overpayment chips away at the actual balance - at least then, the balance to mortgage will be less than what it is now... however, I don't think this can be done?
Any advice would be appreciated.
Many thanks.
0
Comments
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buffness said:If I wanted to overpay to reduce the balance, it looks as though any overpayment will go towards the interest amount only@buffness Where did you get that from, if you don't mind me asking? That isn't usually how it works. If you can dig out the mortgage offer from when you took out this mortgage, it should have the overpayment related conditions described on it.EDIT: If it says something to the effect of "overpayments will reduce the amount of interest charged" that means that overpayments will reduce the capital owed and thus result in lower interest payments going forward. Basically that it will reduce the balance.
I am a Mortgage Adviser - 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.
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The overpayment cannot go towards interest, as you're paying that in your monthly payments.
The only option is for it to reduce the capital.1 -
You pay the interest part every month though so an extra payment can only ever be used to reduce the capital.buffness said:Hi All,
Please can someone assist me with a query?
I own a rental property that is on a Buy-to-Let Interest Only Mortgage. If I wanted to overpay to reduce the balance, it looks as though any overpayment will go towards the interest amount only - the plan was to try and reduce the balance as best as I can for when the fixed-rate ends in a year and therefore the overpayment chips away at the actual balance - at least then, the balance to mortgage will be less than what it is now... however, I don't think this can be done?
Any advice would be appreciated.
Many thanks.1
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