25 year - 35 year mortgage

SAMMYE_2

Is it not better (if you are overpaying) to get a longer term mortgage? As that means you are paying less interest?

Sorry if this seems like a really dumb question :-s

WestonDave

Longer term mortgages have lower monthly payments because you are paying back less capital each month, but because that means the balance remains higher, you would pay more interest in total over the life of the mortgage. If you are overpaying the term of the mortgage is irrelevant - you don't create any benefit by artificially reducing payments to create a bigger overpayment. Overpaying is all about getting the balance down so less interest is charged on the outstanding amount.

SAMMYE_2

WestonDave wrote: »

Longer term mortgages have lower monthly payments because you are paying back less capital each month, but because that means the balance remains higher, you would pay more interest in total over the life of the mortgage. If you are overpaying the term of the mortgage is irrelevant - you don't create any benefit by artificially reducing payments to create a bigger overpayment. Overpaying is all about getting the balance down so less interest is charged on the outstanding amount.

Oh I see cheers Dave that does make sense to me now.

I suppose the only benefit I might have gained when I originally did it was to keep my monthly repayments lower, which is why I think I did it.

alfiesmum

If you're restricted in making overpayments, reducing your term is a way of paying more off the balance PLUS any additional overpayments you're able to make. Word of caution though, it's not a very flexible way of overpaying, in other words, you'll have to find the extra money every month.

If you punch your figures into here: http://www.bankrate.com/calculators/mortgages/mortgage-calculator-tool.aspx and click on 'show amortization table' it will give you a list, for the whole life of your mortgage, showing how much in interest and capital is being paid each and every month. It's in dollars, but ignore that, makes no difference to the calculations. This was a real motivator for me when I started out to be mortgage free!

SAMMYE_2

alfiesmum wrote: »

If you're restricted in making overpayments, reducing your term is a way of paying more off the balance PLUS any additional overpayments you're able to make. Word of caution though, it's not a very flexible way of overpaying, in other words, you'll have to find the extra money every month.

If you punch your figures into here: http://www.bankrate.com/calculators/mortgages/mortgage-calculator-tool.aspx and click on 'show amortization table' it will give you a list, for the whole life of your mortgage, showing how much in interest and capital is being paid each and every month. It's in dollars, but ignore that, makes no difference to the calculations. This was a real motivator for me when I started out to be mortgage free!

Cheers AM