Reducing term of mortgage

Worried

My advisor has advised me that although I could only borrow the sum I need over 28 years, I should be able to reduce the term to 25 years once the mortgage has begun for an admin fee. I can afford the repayments on the 25 year term, so would like to do this and save myself money in the long run. Does anyone know if this is possible? Mortgage is with Alliance and Leicester.

regularsaver1

They most probabaly work on an affordability model which means the longer the term, thew more you can borrow. Others factors also come into play too - ie if you have children, credit commitments ect

anyone know if this is the case with A&L?

humfer

You will certainly save money by either making overpayments of capital or/and by reducing the mortgage term

humfer

humfer wrote:

You will certainly save money by either making overpayments of capital or/and by reducing the mortgage term

Here's an excellent site where you can calculate possible savings

http://www.loanbright.com/edirectlending/calc_amortization.html

jamminjamaica

humfer wrote:

Here's an excellent site where you can calculate possible savings

http://www.loanbright.com/edirectlending/calc_amortization.html

HI

fantastic site. is there somewhere that calculated it in £ Sterling?

jamesd

Worried, please consider the possibility of interest rates rising and consider taking out a mortgage term for longer than required to provide extra safety margin in your ability to keep up with the payments. Then you can check whether your mortgage allows oerpayments and use those to make extra payments when you can afford to do it, without being required to when you can't. The extra time buys you useful flexibility and you don't need to really use it.

You will also have the option or remortgaging and can change things then as well, using savings to reduce the amount and shortening the term that way.

jamminjamaica, one UK site is the Bradford & Bingley flexible mortgage calculator. It's not as flexible as some but it's the one I keep returning to.

Worried

Thanks for everyones advice here. I can make overpayments with this mortgage, but the payment is not applied until the end of the month, so lose a months interest on it. Have used the loanbright calculator and believe I will be better off sticking to the 28 year term and the smaller monthly payment and putting the difference into a high interest account and paying off a lump on remortgage. I've been looking for a calculator like that everywhere! many thanks!

grade15

why has your advisor said that you can borrow that sum over 28 yrs but YOU CAN make payments for a 25 yr term??? if this is possible why not start on a 25 yr term and save the admin fees?
and make little overpayments..but I thought that A+L overpayments were allowed 10% of mortgage only in the month of January..

is ur advisor from A+L??????????

Worried

No - she's independent (or as independent as they ever are!)

I can make overpayments of less than £500 per month but amount I owe and interest would not be recalculated til end of the month.

Can make repayments of more than £500 in Jan and amount owing is recalculated immediately. This can not exceed 10% of the full amount owing.

I questioned how come I would be able to reduce and she said, it's different departments. Lending can't give it to me over 25 years, but once I am a customer paying a mortgage, they will happily reduce the rate for the admin fee of course. She's seen it done before, but I don't quite understand it!

Anyway, it still seems to me I'm better off saving the difference between what I'll be paying per month on the 28 year term and what I'd be paying on the 25 year term and paying off a lump sum in Jan or when I remortgage in 2008. Saves that admin fee!

clairehi

Just to warn you that A&L charge you £275 to leave, if when you remortgage you want to change lender.

I didnt realise that until after we'd signed up, although it probably wouldnt have changed my mind anyway. Also just to say, I was very impressed with the speed at which they processed our application. It all went through smoothly with no fuss. That was in January though which I expect is a quiet time for them.

jamesd

grade15, if you can make overpayments it's easy enough to use a mortgage calculator to work out the payments for 25 years and just make those payments. If you run into financial trouble or interest rates go up you can change to the lower payments for a while without any aggravation from the mortgage company, because those are the payments they originally agreed for the longer term.