Paying 1/2 mortgage off...

nicks

I have a mortgage with A & L. It is now for just under £20,000. I would like to pay £10,000 of it off, would/can this reduce my monthly payments too? I am on the Base Rate Tracker, if this makes a difference?

I am hoping to reduce the monthly payments, which I can then save in a high interest account....

Thanks

Nicks

langsmith

Yes, but state that you are paying the outsatnding balance not interest. Your monthly payments will reduce when they catch up or just continue over paying, to pay back the Capital.

nicks

Thanks - I will get onto them tomorrow.....

Nicks

Tiddler_2

langsmith wrote: »

Yes, but state that you are paying the outsatnding balance not interest. Your monthly payments will reduce when they catch up or just continue over paying, to pay back the Capital.

I never understand it when people say make sure it comes off the balance and not the interest.

When you make an overpayment it will reduce the outstanding balance on the mortgage, however you have 2 options regarding the payments.

1. If you choose to keep your monthly payments the same, then you will repay the mortgage earlier, potentially saving thousands in interest.

or

2. Keep the end date of the mortgage the same as it is at present, but just pay a lower monthly payment. You will still make a saving in interest charges compared with what you would have paid if you didn't make the part repayment, but not as much as you would do under option 1.

Qual123

Here Here!

Gorgeous_George

If you can invest the £10K at a higher return than your mortgage, do so. For example, I have recently opened two ISAs (one each) paying 6.5% and plan to do the same this tax year (next week or so).

That'll be £13,200 earning 6.5% against a mortgage rate of 5.74%. A difference of £100 over the year.

GG

nicks

I have £30K to invest.

£7200 into 2 ISA's (1 in my name & 1 in OH's) - BM's fixed ISA at 6.15%...
£2800 into BM's fixed 1 year bond (AER 6.81%)...
£7,000 to pay off car loan with A & L - remainder put into Savings account....
£10,000 to clear half the mortgage - prefering to lower monthly payments & transfer the money used topay the mortgage into BM's E-saver account (AER 6.5%)...

Does this all sound ok. Trying to sort it myself instead of going to an IFA.....

Thanks

Nicks