Switch and save £40,000
Switching to capital repayments from an interest only mortgage could save borrowers £40,000 over the life of the mortgage, research has suggested.
Research from moneysupermarket.com shows 23 per cent of mortgage holders are on interest only mortgages.
While some borrowers are advised to move onto interest only mortgages if they can no longer afford their capital repayment loans, for others the opposite move could be very beneficial.
Analysis from the comparison site shows the move for these borrowers to capital repayment with their current lender on the same terms will only cost around £25, and mortgage holders will see their monthly repayments rise by around £50.
But due to the current low interest rates, this could save approximately £40,000 over the 300 month life of the mortgage.
Hannah Skenfield, mortgage channel manager at moneysupermarket.com, said: "The fall in the base rate has meant that many people on tracker and variable rate mortgages have seen their repayments plummet, but whilst the initial monthly saving may seem attractive the borrowers really taking best advantage of low rates are those using the opportunity to repay more of the outstanding debt on their home.
"If you are currently locked into an interest only deal the fee for switching to capital repayments with the existing lender is usually only about £25, and so in most cases you should take action immediately."
The figure of 23 per cent is worrying, moneysupermarket.com said, as those without a regularly reviewed repayment vehicle are setting themselves up for a large bill at the end of the mortgage.
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