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Original poster

Our interest-only mortgage has dropped - what should we do with the extra money?

63 replies

BEAUTlFUL · 16/03/2009 20:38

Our interest-only mortgage has gone down with every base-rate cut, and is now £750 cheaper every month. for some reason, this fills me with fear!

What should we be doing with that extra money - paying off some of the capital? (We can do that without any charges.) That would mean we don't get as screwed long-term if the rates start climbing again... am I right?

That would be better than just saving the difference, wouldn't it? Would it?

Neither DH nor I are very good at money, so any help would be fab.

OP posts:
rubyslippers · 16/03/2009 20:39

save it - you will deffo need it in the future to pay off the capital

Pollyanna · 16/03/2009 20:40

We are paying off more of the capital with our mortgage savings. I'm not sure if that does make financial sense, but it feels better to me (presumably if you can get more in interest in a savings account than you are paying on your mortgage you should do that, but I don't know if you can get higher interest)

puffylovett · 16/03/2009 20:40

you could send it to me !!!

muppet here got a fixed rate 2 yrs ago grrrr. having been on trackers for about 7 years !!!

i would pay off the capital if you can, if there's no limit on how much you can pay in yearly. £750 is a LOT of money. Lucky lady !

morningpaper · 16/03/2009 20:42

you should save it

or maybe just MOVE HOUSE, your mortgage must be enormous

I would put money on interest rates hitting over 10% in the next 5 years so PLAN AHEAD!

MissisBoot · 16/03/2009 20:43

How are you proposing to pay off the capital at the moment?

I'm too risk averse to have an interest only mortgage so would start paying off teh capital with overpayments then remortgage with a fixed rate repayment when I thought that rates were going to start going up.

MARGOsBeenPlayingWithMyNooNoo · 16/03/2009 20:44

Pay off some of the capital.

potplant · 16/03/2009 20:45

£750 - I thought we were doing well and we're saving £100 month.

We have filled up our ISA allowance and are not chipping at the capital as interest rates on savings are also low.

See a financial adviser if you are really worried.

(Well, actually I'd have weekend to New York on the first months savings, but that's not really sound advice!)

BarbaraWoodlouse · 16/03/2009 20:46

Paying off the capital is almost certainly the best thing to do I believe.

Try here

potplant · 16/03/2009 20:46

I'm talking gibberish there, I should say that we are chipping away at the capital rather than not.

choufleur · 16/03/2009 20:47

pay off towards the capital.

Original poster
BEAUTlFUL · 16/03/2009 20:49

Our mortgage is about £190,000. Is that massive? (Am honestly clueless on matters like this.) Our small terraced house is currently worth about £290,000, but (obviously) dropping.

Mortgage is variable, so was £1100 a month last year, now is £377.

So we'd be better off saving the cash, not repaying capital now? Even with saving rates being so low? I'm not arguing, I just don't know!

If we paid £500 a month into the capital, that would bring down the total amount so would that not cushion the blow a bit when the rates skyrocket again? Because we'd have a smaller loan?

OP posts:
Itsjustafleshwound · 16/03/2009 20:49

As suggested, I would get some IFA to look over your finances and get some advice as to what to do with the savings ....

We are saving something by the drop in the interest rates, but it also means that our endowment has fallen (dropped more like!!) in value and won't cover the loan in the end, so we will have to find some way to finance the shortfall

Original poster
BEAUTlFUL · 16/03/2009 20:52

I forgot to say the worst bit - we don't have any repayment vehicle. I remember a financial adviser going pale when he discovered that a few years ago.

As DH is clearly shit at this stuff. what do i need to do? See a financial adviser and get an endowment policy now, and use some of this extra money to pay into that, and put the rest into the capital?

OP posts:
potplant · 16/03/2009 20:53

Beautiful - most advice here is saying pay off the capital. Rates will go up and the less you owe, less you pay.

Find yourself an IFA

Itsjustafleshwound · 16/03/2009 20:53

It all depends on what the terms of your mortgage are and how the provider deals with overpayments ....

Original poster
BEAUTlFUL · 16/03/2009 20:54

Thank you. I think i will ask my Dad to help me through this. He is very good at money stuff.

OP posts:
MissisBoot · 16/03/2009 20:55

You need to see an IFA asap.

What do you mean you don't have any plans to pay back the capital - that is crazy - sorry - are you both named on the mortgage - were you aware of this at the time?

Get thee onto a repayment mortgage asap.

Itsjustafleshwound · 16/03/2009 20:55

Because the markets are so sh*t at the moment, perhaps a unit or share based repayment vehicle would be advisable as the units are relatively 'cheap' and should go up in value ... if this makes sense ...

BarbaraWoodlouse · 16/03/2009 20:55

If you don't have a repayment vehicle then I'd definitely see an IFA ASAP.

In the meantime, my instincts say keep paying off the capital. You'll make almost nothing on a regular savings account at the moment.

Original poster
BEAUTlFUL · 16/03/2009 21:00

I'm not on the mortgage, just DH.

I expected DH to know about things like this when we got married, but obviously he doesn't. Shit, I am now going hot and cold.

Will get an appointment ASAP.

OP posts:
MissisBoot · 16/03/2009 21:10

ok - don't worry about it too much but definitely get some decent advice sharpish

If dh is useless about these types of things it might be worth you taking control of the finances so that atleast you know you are managing your finances well.

Original poster
BEAUTlFUL · 16/03/2009 21:17

Thanks! Am definitely going to wrestle control away from him. He effing drives me INSANE about things like this. He is creative and arty... but irresponsible and overly optimistic. I had to nag him for years just to get life insurance.

Have emailed an IFA in my town, will see him as soon as I can.

OP posts:
BarbaraWoodlouse · 16/03/2009 21:19

By BEAUTlFUL on Mon 16-Mar-09 21:00:12

"I expected DH to know about things like this when we got married"

Aah, I expected DP to start to cut the grass and build things in his (specially constructed) workshop when we got married. But nope, still me doing the gardening...

morningpaper · 16/03/2009 21:23

DOH

You need to start repaying NOW

and work out what you will do if interest rates go UP UP UP because they will do in the next few years

and MOVE HOUSE if you need to

wombleprincess · 16/03/2009 21:41

pay off the capital, dont see an IFA, if you arent paying of the capitral on your mortgage snd can do without penalty then you dont have the spare cash to invest.