Paying extra?

Rikki

I overpay my mortgage by £30 to £40 each month.
As it is part repayment and part interest only which part of the capital does it pay off? Which would be the best to chip away at and why?

Joe_Bloggs

@Rikki
Your overpayments should go towards paying off the capital. There are some sneaky terms and conditions out there however. Some lenders choose to ignore overpayments until a certain date in the year. With some lenders you are fined a percentage of the excess payment for overpaying too much per month.
J_B.

Rikki

I don't surpose you know how the Woolwich work?

Thefunkygibbons

Looks like you will have to dig out your original offer letter

The terms vary by mortgage product

Rikki

I will hunt the letter out. Unfortunately the mortgage adviser with the woolwhich at the time has now left and he was a great chap and very helpful.

Joe_Bloggs

You can't pay interest you have not been charged, in advance. So the overpayments must go towards the capital given reasonable terms and conditions. This is not something to worry about. If you manage to find your mortgage account number then you can probably find out your current mortgage situation with a phone call. You did not mention the rate of interest that you were paying on the mortgage capital. Many attractive rates/deals eventually drop to a rate that is a poor deal. Many people pay these rates when they could get better. It is called consumer inertia. If the active consumer puts some effort in, they can get a better deal and save money.
J_B.

Rikki

Tracker for the life of the mortgage. 0.5% above base.

As The mortgage is 2/3 repayment mortgage and 1/3 interest only payment on that capital. Is the capital on the repayment side reduced by the over payments or the capital on the interest only side of the mortgage? ( could I choose? )

Joe_Bloggs

I understand the situation now but I realise that I don't have a clue. Is there some endowment/other policy that is meant to eventually pay off the capital that generates the interest only element ? Either way overpayments should still reduce capital. As to where your payments go, only you can find out. I hope you are rewarded by your curiosity and vigilance.
J_B.

Rikki

I have found out I can choose where my over payments go.
I think it would be best to make the over payments off the interest only.
Any other thoughts.

jnd

I don't think it matters what you pay off first unless you have a shortfall on your endowment, or whatever's in place, which is covering the interest only portion of the mortgage. In that case you should definetly apply the overpayments to it.

Rikki

No endowment because of successful claim. So the interest part it is.