10 or 25 year mortgage

MoneyMoney

Hi

I have a small flat that my wife and I live in, we bought it in April of this year for about 180k, as no banks would lend us any money we bought smaller than we wanted and had to whack down a 25% deposit. This has meant that we now owe after overpayments about 100k (after 30k building work property is 200k+), we are on a two year fixed from April. We have rented for the last few years at about £1000 per month.

Speaking to Natwest, we can move from a 25 year to a 10 year and the repayments will be about £1050 per month which we can handle.

My question is do the maths work out to change to a ten year (which is within our means and we will not move for a few years at least and would not plan to sell it even then) or should we leave it at a 25 year and just overpay 10% a year. Sorry there are no actual % but just general reasoning would help and I will do the maths as and when I get the details!

tldr; we bought a place on a 25 year but could afford to buy on a 10 year should we switch.

Keith

What happens if one of you need to stop working through illness/children?

MoneyMoney

That is a thought but at the moment we both have a job that could keep us afloat individually (just!) there are long term investments that could be cashed (painfully but would do it) and our families could probably get us over a bump. So understand the question but not our main concern.

Mrs_Z

I would be weary of changing to a 10 year mortgage. It's much better having a longer term loan and over pay as if your circumstances suddenly change, you can then just stop the over payments. We remortgaged to a tracker this year (HSBC), and that has no limit how much you can overpay. I remember reading a post here some time ago, where a couple had taken a 10 year mortgage because they could afford it and then they both lost their jobs. They wanted to extend the term but the bank was not very symphatetic at all. They had savings to last for about a year, but what do you do if you had not found a new (well paid) job by then?

opinions4u

If there's no penalty for overpaying, take a longer term and overpay.

But be disciplined in making sure you do.

Then the mortgage will be gone in a shorter period anyway.

Absolutely

I think it has to depend on the terms of your mortgage. I have a fixed rate for the next 4 years.

I recently reduced my mortgage term with the Halifax from 14 years to 10 years. There was no fee for this. But:

- I can still overpay 10% of the outstanding mortgage on a rolling 12 month basis each year

- At any time, I can revert back to a 14 year mortgage term

- If I want to take a payment holiday, the overpayments I have made will be taken into account and determine how long I don't have to pay a monthly mortgage payment for

Hope this makes sense

MoneyMoney

Thanks everyone, I will keep it as is and when it comes up for renegotiation will try and get the 10% overpayment level raised.

Underscore

Unless the 10 year was offering a much better interest rate, I don't see how the maths would work out. And also the flexibility issue is a very valid one, I would have thought in this instance you are much better off with the status quo, even if its difficult to quantify every factor exactly.