Increasing the term?

Pinklepurr

My current mortgage deal with Accord runs out March 07 so early next year I will be looking for a new deal. The term remaining is 16 years and I have been wondering whether to extend the term to 20 years to make the monthly payments less of a burden. I am 35 so I am guessing that there should be no problem doing so.

Fortunately, once a year I am usually able to pay a lump sum of 3-5k as hubby gets a bonus from work (not guaranteed but consistent for the past 5 years) so this would chip away at reducing the overall debt and mean we could probably pay it off sooner. However, I am rubbish at working out if this would be a good move or not. Can anyone help or point me in the right direction.

Thanks

PP

Ian_W

In strictly moneysaving terms extending the loan will be quite the wrong thing to do. You don't say how much you owe or what your interest rate is but a simple example would be -
£50,000 at 5% = £2,500 pa EXTRA interest paid x 4 yrs = 10 grand.
You've not borrowed any more just kept the mortgage on 4 yrs longer.

That said, if you are struggling to pay the mortgage doing that is far better than risking default and over-paying a substantial sum each year will have the effect of reducing the term anyway. It's just that you should be aware it isn't a cheap way of doing things but you'll still only be 55 when your mortgage finishes so it's certainly quite possible if it's better for you and your circs.

skintlass

I'm going to extend my mortgage as I intend to sell the house next year and would find it a big struggle to pay it at current rates as I changed my job recently and am bringing home less money. I know its not the best idea and it pains me to do it but in order to have a life I think its the best plan for 1year. I can still overpay so if my circumstances improve thats what i'll do.