Shorter Mortgage Term?

nm123_2

Hello there,

I was hoping to get your thoughts/general advice on something, please!

I'm a FTB, hoping to buy somewhere in mid-2009 once my partner and I have a healthy deposit saved (approx £25k=10%).

I was having a look at the Nationwide mortgage calculator and it seems that £250k:

Over 25 years, payments on a 3 yr fixed deal would be approx £1700
Over 12 years, payments on a 3 yr fixed deal would be approx £2500

My thoughts are if we can afford to pay more over a shorter term, we'd be doing ourselves a favour when it comes to remortgaging at the end of Yr 3?

We'll be turning 30 when we buy, so we're concious of being able to build up a decent amount of equity and the intention is to buy somewhere that will do us for a few years, allow us to have a family and then either extend or upgrade when the kids are a bit bigger (all completely hypothetical at the mo!).

My thinking is is that if we did need to free up some cash after Yr 3, we'd be able to remortgage for a longer period and (depending on interest rates) have lower monthly payments? Or if we found this amount to be manageable, stick to the shorter-term and be mortgage free by mid-40's?

Is this realistic? Is it worth stretching ourselves? Will the shorter term be worth it in the long run?

Any advice or guidance welcome.

Thanks

Also posted in Mortgage-Free Wannabees!

kezza12

One option is to get a longer term mortgage and then overpay what you want when you want to shorten it. therefore if there are times when it isn't practical to overpay and you need more money for other things then you can take an overpayment break. or not. The option is there though and you won't be tied in to paying a very high mortgage.

nm123_2

Thanks. I guess that way would give us more flexibility. I had another look at the N/W website and it seems that you can overpay on Fixed deals as well as Variables ones. Is this right?

I would obviously plan to shop around - just so happens I'm with N/W at the moment, so had a quick look on their website...

kezza12

i have a fixed deal with Halifax and they allow me to over pay by 10% of my mortgage debt each year and what's more i can just walk into the bank and put money into it just like putting it into my bank account it's great. the other half and i have a mortgage piggy bank which sits on the top of the tv and we throw pound coins into it, then every month i empty it and put in into the mortgage, about £100 monthly, on top of that I've set up a £200 standing order. of course every mortgage deal is different but most let you over pay:D

nm123_2

Good one. It seems that overpayments are the way forward...

happybroker

nationwide allow up to £500 per month in overpayments at the moment