Overpayments vs. Term

razza100

Hi,

I have been making a huge effort to pay down my mortgage lately and have been pretty successful. I am trying to build up as much equity as possible so we can move house.

Mortgage repayment is £1,107.17 and I'm paying £1,750 - £2,000 so a hefty overpayment of circa £700 per month. I now have 21 years left on the term. If I continue on my overpayments I could be clear in 14 years or so.

Am I better off fixing my required mortgage payments to a lower amount and keeping the term the same (presume this would incur more interest?) so that I would have a lower repayment amount each month or am I better off keeping the term where it is and continue to make the overpayments?

i.e. If I was to adjust my mortgage repayment to say £700 and I continue to pay £1,750 - £2,000 in total, my overpayments will come out about £400 more a month. Would that mean that I am chipping away at the capital more than what I'm currently am?

Thanks.

smcqis

reduce the term saves more money

razza100

thanks. why is that? because less interest?

pstones578

smcqis wrote: »

reduce the term saves more money

I overpay and reduce payments. Then the next month I increase the over payment to take into account the reduced amount I'm commited to pay off each month. This was I've got extra wiggle room if made redundant as I have less to find.

ViolaLass

smcqis wrote: »

reduce the term saves more money

If you kept your monthly payment at, for example, £2000 (including the amount you MUST pay) then you don't need to reduce the terms (unless you're looking to avoid overpayment penalties, which vary). Keeping the term the same, assuming there are no penalties, gives you flexibility.