Mortgage overpayment-or not?

Christa1

I wonder if anyone can advise me please. Our mortgage is not that huge and we both work full time. We have a mortgage part endowment part repayment. The repayment element finishes this November when our 5yr fixed at 4.99% finishes. The mortgage then continues till 2011. The plan was to leave the payment as they are( despite having paid off the repayment element) to reduce it, although as there are only a few years to go have we left it too late? Also as our fixed is a good rate now should we try and overpay now when the rate is low as opposed to after November?

Welshlassie

The more you chuck at it now the quicker you will pay it off. Will you be going onto the SVR in November?

Christa1

Well normally I would say yes unless we opted for another fix, but unlike 5 years ago when it cost us nothing it now costs around £1k in arrangement fees according to what I have read. If we over pay do we have to say where the payment is made i.e off the capitol? Never having done this I am not sure and do we need to set up an account to overpay?

Welshlassie

Pay it off the capital otherwise they just reduce your monthly payment, which leaves you in the same position.

You should just be able to pay it from your normal current account, just need to mortgage account code its going into.

Christa1

Our mortgage is an endowment so had thought we were just paying interest. Can we pay off a lump sum or would we have to wait until the fixed rate finished?

Welshlassie

Best bet would be to ring them and ask or check the T&C's. Most mortgages will allow you to pay off a certain amount without incurring early repayment charges such as 10% of the total pa. Otherwise just save it up in a high interest account (if it is higher than your fixed rate (after tax) you are better off doing it this way anyway) and then lump it off when the fixed rate finishes.

If you have an endowment you would just be paying the interest, but if you pay off some of the capital there will be less capital for them to charge interest on (does that make sense)