Help - Lowering Years on Mortgage !!!

killerk55

Right , First Time buyer

Recently got a mortgageof £60000 . .house was £70k but had a £10k deposit to start us off .

As I had a bad credit history my partner had the mortgage soleley in her name .
we opted in for the 40 years mortgage . Im already beginning to think its a mistake . . our payment are low at £340 a month . but Ive done the maths and thats £163200.

Were ona 5 year fixed rate . . . .
I tried out mortgage calculator and if we pay like 500 a month it could go down to like 18 years . we could afford that and I like the idea of wiping off over half the time . .

How would I go about this without occuring charges . would I have to remortgage or would halifax(who we mortgage with) lower the years

Dont wnt to be paying interest for the fist 20 years . Just ran b4 we could walk really and got excited to be paying so little . .

In the meantime the house is getting completely refurbished . Professionally by myself . spend like £6000 on the kitchen . living room . bathroom ..garden . drive . so house value would have risen a significant amount

Please could somebody help
any suggestions welcome

nw_man

Check your offer letter, but I am pretty sure you could make overpayments of 10% per annum without incurring any costs or penalty.

This will bring the term down.

I dont think you would want to get out of the deal, they will hit you for hefty penalties.

Gorgeous_George

You don't have a mortgage.

I make it that your partner's fix is about 6.2%. Your partner can ask his/her lender what the maximum overpayment is per year. S/he also needs to ask whether this can be paid monthly or annually. If overpayments are only allowed annually, s/he should find a high interest regular saver (LloydsTSB pay 5%) and save the extra to repay once per year.

Don't get too excited about the savings. Overpaying now does reduce the term but you can't compare £1 today with future years. Who knows what your repayments would be worth in years 2040-2049 (due to inflation). For example, £340 may be 25% of your income but in 2040 may well be 5% of your income. So you can overpay by 12.5% of present income only to save 5% of income in 2040.

Finally, what happens if your relationship goes belly up? You don't own the house so you could lose whatever you have spent doing it up (you lose most of it even if you own the house). It would be easier if you paid rent to your partner. What happens if your relationship goes belly up and the house is worth less than the mortgage?

GG

killerk55

The house will be increased in price from the work put into it , It was a old fashioned home and it has been completeley re modernised . I an gurantee that .

We both viewed and purchaed the house , and yes its her mortgage , we decided on this due to the fact my credit history would have made the interest far more . It was the best option

Its a 5 year fixed rate and I believe theres a penalty of coming out within the first year of aroun £3000 . but this seems ike nothing if Im able to knock off like 22 years of mortgage


Just wanted to know if we could go to haklifax and say right we can pay more , can yuu put it to 18 years and ay like £500 odd a month for example

or if not we just do it elsewhere and pay the £3000 penalty ,

In that instance if the house value increased from £70-£90k wouldn we have more equity or sumthn

Pleease help , and sorry if I sound daft , just trying to get the grasp of it all

Gorgeous_George

Where the debt and savings are is not important. The only focus should be the interest rate.

It is unlikely that Halifax will change the term of the mortgage. It is unlikely that this is the best option for you at this time. Make sure you save anything that you would otherwise overpay in a top paying savings account (see Martin's guide). Then, pay a lump sum off the mortgage when Halifax allow it or keep saving so that when you remortgage, you can choose a shorter term.

Interest rates are likely to be higher in 5 years time. Over the next 5 years your circumstances may change. Maybe you will have kids or one or both opf you may become ill or lose your jobs. Having cash outside of the property saves you the hassle of MEWing (withdrawing equity from your home). This flexibility has a value.

Why not save £6K and then ask Halifax if you can overpay while keeping your repayments at the same level. This will reduce the term.

Speak to Halifax.

GG

dimbo61

You and your partner should save money as an emergency fund about 6/9 months of income before overpaying the mortgage.
Barclays 6% regular saver and HSBC 8% RS ( before tax) £250 a month for the next year!
Once you have proved you can save £250/£500 a month then you can ask to reduce the term from say 40 years to 25/30 years ( use "whatsthecost" to work out the figures)
But I would build up your savings first GOOD LUCK

Catanddogs

Halifax recently allowed us to reduce the mortgage from 22yrs to 12 without penalty.