Our mortgage expert, Mike Jones, from Lloyds answers your mortgage questions:
Jo Bailey from Cambridge asks:
I have a 10 yr fixed rate interest only mortgage. Our endowments etc will not cover the debt at the end of the term. If I overpay, will this reduce the capital? Is it worth it (fixed rate is 4.9%) or should I simply save more to be available at the end of the term?
You’re doing the right thing, Jo. You should always try to keep up to date on how your endowments are shaping up against your mortgage. That way, you give yourself more time to assess your options and more time to address any shortfall, should one arise. Most lenders allow you to overpay by up to 10% of the loan each year, i.e. on a £100k loan you could pay off £10k without penalty. Paying down your mortgage will reduce the balance and you'll pay less interest as a result. If you can then keep your monthly payments the same, the small amount of interest saved each month will reduce the balance even further. This combination will certainly help you reduce the shortfall vs. the endowments and you'd be wise to take action as soon as possible. If you have any concerns, you should always contact your lender and talk them through your concerns.
If you have a question for Mike, go to the myfinances.co.uk Ask the Mortgage Expert section.
Or for more information on your mortgage options go to Lloyd's mortgage site.
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