Overpayment/reduced term

Jaha2

I'm due to finish the 2 year discounted rate on my first mortgage soon, I've been overpaying each month and I want some advice about my best course of action now.

My mortgage was at 168,000 to start with, I pay £875 with a 20% overpayment each month. My current interest rate is 4%. I've got 10K in savings which I'd like to use to pay off some of the mortgage.

The house was valued when I got the mortgage, will it need to be valued again when I remortgage? Also, who do I give my extra 10K to? I was buying the house during my last application so the solicitor dealt with all the money for me.

When I'm looking for a new mortgage I'm not sure what the best course of action is. I can afford to pay the 1050 a month that I pay now so should I:
- reduce the term of my mortgage and look for my monthly payment to be 1050 (with no overpayment)
or
- reduce the term of my mortgage and look for a monthly payment of 875 with overpayment allowed (matching what I do now)
or
- keep my current mortgage term and look for a mortgage rate less than 875 but that allows unlimited overpayments (so I can top up to 1050)

Thanks!

dimbo61

So many questions and so many answers!
Well done on overpaying each month ( HSBC) by any chance
You dont give the current value of your property or the outstanding mortgage!
Do you want a tracker or fix , offset ( as you have savings ) or IO so many choices.
With out knowing alot more about you , your family, job, income, kids, savings, job security ETC it would be wrong to say this is best!
If you do reduce the term then you HAVE to pay the new mortgage payment every single month !!!
If you go for a flexable mortgage ( offset ) yopu can overpay as much as you like provided you dont clear the mortgage

Jaha2

I hadn't considered an offset mortgage, I don't know anything about them but I won't have much in savings after I put the money on the mortgage so not sure it'd be worth it. The current HSBC one I'm looking at is a discount tracker (I think). I'm definitely looking at capital repayment though, not interest only.

I don't know what my house is currently worth, I don't think it's dropped in value, will I need to get it valued before I start the mortgage process?

dimbo61

Not if you stay with your existing lender only if you more lenders

cultural_vandal

Definitely keep your mortgage term the same. Then at least should you have some change in your circumstances you'll be a lot more confident of being able to make the standard monthly payment.
Even if you choose a fixed or discounted rate with HSBC where you're limited to the 20% overpayment, you can always just do the 20% and make a lump sum reduction before/after your rate is applied

Lifes_Grand_Plan

OP, who is your current mortgage with?

If its with HSBC then they will revalue your house using data they already have... we are just remortgaging from a fixed rate with them to the fee free tracker and they did that with us. First valuation was quite low, must have been using general house price figures for the West Midlands... so they offered to do a more detailed valuation (still using data they have) and came back with £127,000 (house was originally purchased for £126,000 in 2006).

If your old and new mortgage is with HSBC then they will probably do the same.

Jaha2

I'm currently with HSBC but may switch to Santander if they can match HSBC.

cultural_vandal can you explain the logic behind keeping the term the same (and not getting unlimited overpayments), won't I end up paying more interest because I'm paying less off each month?

I've currently got 160,000 left to pay (this will come down again before my deal ends), value of the house was 198,000.

Having looked at all the numbers again I'm not sure if it's worth paying the 10K off the mortgage rather than keeping it in savings (I currently get 2.5% on my savings).