MFW Newbie - with some questions

totally_confused_3

Hi,
Have just moved into our new flat and absolutely loving it!!! :j But now it comes the big question of how to repay our mortgage. Just had a look today on our mortgage account and I am horrified at the amt we have to pay and want to come up with a plan to pay it off in the next 3 years. But before I do so, I need 1 question answered on monthly payments.

Basically we are on an offset mortgage with IF and are currently on an interest only plan. I know pple talk of overpaying etc... (and capital repayments) and was thinking of going down this route but not sure if it makes any difference. OH thinks that it makes no difference if we stick to interest only and put our savings into the offset account (as everything is offset) but somehow I think that might make a difference.

Note that IF has 3 separate payment options as well: Shorter Term, Lower Payments and Reduced Debt. We are currently on Lower Payments but I am interested to get onto Shorter Term if it is going to make a difference.

https://my.if.com/help/jargonbuster/glossary_mortgage_payment_option.htm

Any help would be greatly appreciated!!! Thanks!!!

Trying_to_be_good

My guess is that you should opt for 'shorter term' if you're happy to keep your minimum payment at the same rate it started at. If you want to increase that amount, you could switch some of the 'interest only' to being repayment.

It shouldn't make a difference if you save in the offset, or pay off the mortgage except with the first you have easy access to the money, with the second you mightn't be able to get it back - the first is good for flexibility, the second is good if you've not got good willpower and might be tempted to dip into that overpayment pot!

totally_confused_3

Thanks for the reply. I guess we would be fine to keep the payments fixed at the initial rate but does any "excess" go towards repaying the capital on an interest only mortgage?

OH handles the finances and is very discplined in putting our savings/excess into the offset account and prefers to keep the flexibility which is why we are on an interest only. I am just concerned tat we might have to pay more interest than necessary, which is wat I understand happens on the non offset interest only mortagages, whereby the amt of interest you pay is much more than on a repayment mortgage.