Reducing term of mortgage or overpay??

Denise_and_Peter

Hi can anyone tell me is it better to reduce the term of your mortgage or make overpayments (if the mortgage allows overpayments). How can I work out the calculations?!!

Many thanks

dimbo61

Well you can use " whatsthecost" to work out how much extra reducing the term would cost one year at a time if you want to
IE original term 22 years reduced to 10 years = increase in monthly mortgage payment of £500
But this saved me £50,000 in interest. Rate was 4.75%
Is it better to reduce term or overpay ?
that depends on you and OH ! Now are you a saver or spender? do you have savings in cash ISA,s ?
If you reduce the term then you HAVE TO pay the new mortgage payment every single month even if things are tight !!!
But if you lender allows overpayments then you can OP as and when you have the spare cash.
We took the decision that we could afford to pay a higher mortgage payment every month and clear the mortgage quicker.
Faster paid off the less interest paid.
You need to read the mortgage paperwork carefully as many lenders allow say 10% OP a year which is great when you owe £150K and can only afford say £5K overpayments but does not work when you have a £60K mortgage and can afford £13k OP,s
Check how much it costs to reduce the term and OP for a year or two at a rate you can afford and then reduce the term to that amount

davetrousers

Use the MSE Mortgage Calculator.

Refer to your mortgage Ts and Cs or phone them up.

getmore4less

It makes no difference if the monthly payment total is the same.