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    • Merchandiser2367
    • By Merchandiser2367 12th Oct 17, 6:07 PM
    • 136Posts
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    Merchandiser2367
    Mortgage Free - Mortgage Renewal Query - Overpay vs Reduced Term?
    • #1
    • 12th Oct 17, 6:07 PM
    Mortgage Free - Mortgage Renewal Query - Overpay vs Reduced Term? 12th Oct 17 at 6:07 PM
    Good evening all

    We are due to remortgage next week and need some advice please.

    Would there be any difference in keeping our term at 21 years vs reducing it to 15 years and paying & overpaying the same total amount each month? (5 year fixed term)

    I.e - 15 year term will be £940 fixed payment a month. We are planning to over pay£1500 a month (£2440 total)

    Will this be any different to paying 21 year term - £700 fixed payment a month and then over pay £1740 a month (same overall total, £2440 a month).

    We are with Halifax and it seems they allow 10% of total original mortgage overpayments before charging so I think the 2 above examples will give same result?

    I'm enquiring as we are both contract workers and contracts up in next couple of months so not sure if reducing the term will mean a new check and probably need to wait till we get new contracts, after the possible interest rise.

    The 21 year term, we can just accept online without speaking to anyone so would work for us with our contract situation.

    Any advice would be much appreciated!

    Thanks
Page 1
    • Tropically
    • By Tropically 12th Oct 17, 7:47 PM
    • 158 Posts
    • 432 Thanks
    Tropically
    • #2
    • 12th Oct 17, 7:47 PM
    • #2
    • 12th Oct 17, 7:47 PM
    If you reduce your term, you will be liable for new, higher monthly payment. If you would struggle to pay the new higher monthly repayment if you lost your jobs, then I would keep the term long and overpay more.

    Is the rate the same?
    Mortgage started at £318,000 in June 2016. Original MF - 2041
    2017 OPs: £7000/£7000
    Mortgage in Nov 2017 - £297,808
    • wishingthemortgaheaway
    • By wishingthemortgaheaway 13th Oct 17, 6:08 AM
    • 639 Posts
    • 2,521 Thanks
    wishingthemortgaheaway
    • #3
    • 13th Oct 17, 6:08 AM
    • #3
    • 13th Oct 17, 6:08 AM
    We're with the Halifax too, our overpayment limit in a year is 10% of the balance at January 1st of that year, not 10% of the original loan amount. So I'd just double check the point the 10% comes from.

    Depending on interest rates some people open a saver account with a higher rate of interest than the mortgage and put all of their overpayments in there, earning more interest than the mortgage is costing.

    Wish
    The 100 payment countdown (each payment = £400)
    2017 July : £36,800 8/100 Aug: £36,411.85 8/100 Sep: £35,945.66 10/100 Oct: £35,500 11/100
    Term Mortgage free date: October 2029
    Current mortgage free date: April 2025
    • Merchandiser2367
    • By Merchandiser2367 13th Oct 17, 2:45 PM
    • 136 Posts
    • 948 Thanks
    Merchandiser2367
    • #4
    • 13th Oct 17, 2:45 PM
    • #4
    • 13th Oct 17, 2:45 PM
    If you reduce your term, you will be liable for new, higher monthly payment. If you would struggle to pay the new higher monthly repayment if you lost your jobs, then I would keep the term long and overpay more.

    Is the rate the same?
    Originally posted by Tropically
    Yes rate is the same but I have realised that the over payment charge would be more over the 5 years as we will reach our 10% threshold quicker with the longer term, smaller fixed cost each month


    Thanks for your help
    • Merchandiser2367
    • By Merchandiser2367 13th Oct 17, 2:46 PM
    • 136 Posts
    • 948 Thanks
    Merchandiser2367
    • #5
    • 13th Oct 17, 2:46 PM
    • #5
    • 13th Oct 17, 2:46 PM
    We're with the Halifax too, our overpayment limit in a year is 10% of the balance at January 1st of that year, not 10% of the original loan amount. So I'd just double check the point the 10% comes from.

    Depending on interest rates some people open a saver account with a higher rate of interest than the mortgage and put all of their overpayments in there, earning more interest than the mortgage is costing.

    Wish
    Originally posted by wishingthemortgaheaway
    I checked with them and is indeed 10% of balance at start of year, thanks for letting me know

    I will look into the saving option. Interest rate will be 2.09% for 5 year fix so will compare it to that

    Thanks again
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