2 Year Term Mortgages??

balmufc

Hi - I'm looking to reduce the term of my mortgage to 2 years so I'm looking for a new provider who offers mortgages for a term as low as 2 years.

The only one I can find so far is First Direct - just wondered does anybody know of any other providers who offer a 2 year term mortgage?

Thanks

betmunch

Why not get a fully flexible mortgage with a slightly longer term to keep the lender happy and simply overpay it like it has a 2 year term?

balmufc

betmunch wrote: »

Why not get a fully flexible mortgage with a slightly longer term to keep the lender happy and simply overpay it like it has a 2 year term?

Is this possible? Do you mean get a mortgage with a term of 3 years but make overpayments to effectively reduce it to a term of 2 years?

If so is this possible? I was under the impression that making overpayments reduces the monthly repayment amount rather than the term of the mortgage?

balmufc

Also is this more likely to incur early repayment charges for finishing the mortgage before the agreed term of the mortgage?

betmunch

Any overpayment will come off of the capital, how the mortgage adjusts is up to you, either a shorter term, or lower monthly repayments.

This will only incur an early repayment charge if there is one in the mortgage, you will need to find one that allows such large overpayments

With regard to the term I would suggest you look at a minimum of 5 years to get most lenders interested in the business, but then simply overpay as much as you can to have it paid off in two years

blueberrypie

Overpayments are handled in different ways by different lenders. Most will allow you to choose whether the overpayment will shorten the term of the mortgage or reduce subsequent payments.

balmufc

OK great thanks for your replies. Just to give you some background of our situation. We fixed our mortgage 3 years on a 10 year fix and with a 10 year term. The rate was around 5%.

We now have 7 years left on our mortgage but think we should take advantage of the lower rates likely for the next couple of years and try to pay off our mortgage by remortgaging with a 2 year term (or as suggested a longer term and make overpayments). This will incur a charge to get out of our current mortgage which still has 7 years left to run but even with this charge we stand to save quite a bit by remortgaging as the term will be reduced so significantly. We decided that rather than saving like we do now we should pay off the mortgage rather than into savings.

This seems to make sense to us - does anyone know if we are missing something?

cathh70

We were in a similar situation, fixed for 10 years at 4.99 in Oct 2005, although we still had 18 years left on the term of the mortgage. For the first few years our savings were earning more than the interest on the mortgage, but this stopped last year. Personally we didn't want to pay a 3k penalty, as this would negate any savings gained by remortgaging, so we have made use of flexible overpayments and have paid off 99% of the mortgage, saving over 20k interest.
Obviously it depends on the value of your mortgage, the ERC amount, amount of overpayments allowed and the potential savings.

blueberrypie

balmufc wrote: »

We now have 7 years left on our mortgage but think we should take advantage of the lower rates likely for the next couple of years and try to pay off our mortgage by remortgaging with a 2 year term (or as suggested a longer term and make overpayments). This will incur a charge to get out of our current mortgage which still has 7 years left to run but even with this charge we stand to save quite a bit by remortgaging as the term will be reduced so significantly. We decided that rather than saving like we do now we should pay off the mortgage rather than into savings.

What happens if interest rates are substantially higher in two years when you are either on a SVR or are remortgaging?

betmunch

so you think paying the full ERC would be better than just ignoring it and overpaying as much as posible?

If you have a 10% per year overpayment facility that you get with most high street lender you are likely to do better staying where you are and just ingoring the ERC, that way you will not end up paying the full ERC at all AND there wont be any set costs of a new mortgage!

I think you need to get some proper advice rather than a forum where there are too many assumptions

balmufc

blueberrypie wrote: »

What happens if interest rates are substantially higher in two years when you are either on a SVR or are remortgaging?

The plan is to be mortgage free in 2 years which is why we are looking for a mortgage with a term of 2 years - we want to reduce the length of our mortgage from the current 7 years to as low as possible as interest rates are low and we feel it is better than putting it into savings as savings rates are low at the moment.

Therefore if interest rates are higher in 2 years it won't affect us as we would have paid off our whole mortgage. The problem I have at the moment is trying to find a lender who does 2 year term mortgages - can only find First Direct at the moment but there must be others so will keep on looking.