Help needed with Re-mortgaging

goldbyron

Hi

I am due to re-mortgage and have just started the search on moneysupermarket although the comparision site isn't the best in terms of initial transparency. I currently have a 4.74% mortgage (22 years left) and am looking at approximately re-mortgaging for at least 1% less than this. I am re-mortgaging for 22 years - however my monthly payments don't seem to reduce by much as I am not doing it over the 25 years. Is this the correct way to re-mortgage i.e. applying for the current term you have left? You seem to miss out on getting the most from reduced interest rates? A little confused....

Thanks

tyllwyd

If you remortgage over 25 years, effectively you are extending your mortgage by the three years you have already paid, so you are paying your mortgage over 28 years. That's why it looks cheaper.

It all depends on your priorities - cheaper monthly payments, or getting the whole thing paid off. If you remortgage to a new deal every three years or so, and every time you remortgage over 25 years, you will never get any closer to the day it's paid off completely.

goldbyron

Definitely - my priority is getting it paid quicker. It must be the way they work out interest over the time rather than the rate itself. As my payments at 4.74% with my current co. are 640 per month with 22 years left and yet if I switch to say 3.6% I only save about £40 per month. Which of course is great but I thought it would be double this.

tyllwyd

What you need to look at is a mortgage amortization (or amortisation) schedule, and play around with dates & interest rates. That will show you the relationship between interest & capital in your repayment mortgage.

There is a good one here
http://www.hamdenproperties.co.uk/mortcalc/calculator.php
(although the link isn't working for me today)

mahdlo

why not continue paying the £640/mth you are used to (and is presumably affordable) and reduce the term further ???

shop-to-drop

Is your current mortgage definitely a repayment mortgage and not interest only?