Overpay Mortgage or Not

[SENMumoftwo]

We have an interest only mortgage of £170k

£165k is 2.5%
£5k is 2.25%

We have 14 years left on Mortgage.

Are we better to overpay on the mortgage or pay into ISA/savings account?

If you can't afford to overpay to the equivalent of a repayment mortgage though, you certainly can't afford to switch to a repayment mortgage unless the interest rate is significantly lower on the repayment mortgage.

Can you not simply take out a new mortgage at the end of the term if you have a bit left to go. Our plan is to clear ours before the end of the term by overpaying but if worst comes to worst and we haven't cleared it then we'll take out a new mortgage or extend the term and by then the loan to value will be tiny because we'll have paid off so much of the capital.

Interest only mortgages are incredibly valuable and very hard to get nowadays. Whatever you do, don't give it up unless you are sure that you will make significant savings by doing so.

We're more than doubling the monthly payment, which is possibly more than a repayment mortgage, however, due to the huge shortfall, and us not able to extend the period with current company, then we are likely to need a drastic change in circumstances or we will be mortgaging the shortfall.

It's all so disappointing and I really appreciate all suggestions.

Is your interest only mortgage on a fixed rate for the term? If not you could be liable for rate changes. Options as I see it are :

1. Overpay approx. 1k per month to clear the capital component in the mortgage term ( you could reduce this 1k according to the endowments anticipated realisation value)
2. Speak to a broker re the viability of switching to a repayment mortgage - consider a fixed rate and maybe extending the term. Most fixed rates allow some component of overpayment and you could set the term to a level that allows you to make the repayments.

You haven't mentioned what ltv you have on your current mortgage, so it could be that you have enough equity to access a reasonable rate.

Maybe look into claiming for being misold the endowment? Have a Google and see if you agree whether the criterial apply to you.

There should be template Letters online to use.

I overpay
I would also look into getting onto a repayment mortgage

Overpay as others have suggested. MSE and the forums are a wonderful fund of information and encouragement. I don't have much spare as on a very limited budget but will overpay very small amounts at the end of the month - partner shocked at the difference this has made - he's now doing it! People on the forums will also give advice about remortgage - if they have an interest it must be said ie mortgage broker.

I felt quite despondent about my situation until I started reading all the information and acting on the advice.

overpaying is nearly always better than saving as the interest you will be paying on a mortgage of that size will be large