Interest and capital repayment split – which to repay?

Good Question Kevin,

It depends on why you are making a capital repayment and what you do after.

If you make a reduction in the size of the repayment loan, but do not recalculate the monthly payment then your monthly Direct Debit will remain the same and you will pay this part of the mortgage off faster ie. effectively reducing the term. However you could keep the term the same and have the lender recalculate the Direct Debit so you are paying less per month, but you will pay the loan off no faster.

If you pay a lump sum off the interest only loan this will not alter the term, but you will have a smaller amount of capital to find at the end to repay the mortgage.

So do you want to repay the entire mortgage over a shorter period of time or do you want to decrease your monthly outgoings or do you want to make sure you are not required to find a lump sum at the end of the mortgage term?

Any capital repayment element of a Buy to Let Loan is not tax deductible.