Changing mortgage term

englandcrew

Can mortgage lengths be extended when you remortgage?

If I was to get a five year fix early next year for 25 years could I remortgage when that term ends for 25 years. My thinking being that if interest rates rise dramatically in five years time and I cannot afford the interest rate, by extending it five years it will be cheaper.

Also if that is a silly idea is it better to simply start with a 30 year mortgage and make overpayments on a monthly basis.

Thanks in advance

ACG

You can usually extend the term upto a certain age - usually retirement age (so that will be 67 now for most people). If you want to extend past retirement age then you need to have some prove where you will have money coming from past that age (usually a pension or savings).

You can also do it the other way you mentioned and over pay by about 10% each year without any fees - but you would need to check your actual mortgage documents to find out exactly for that.

Thrugelmir

englandcrew wrote: »

Also if that is a silly idea is it better to simply start with a 30 year mortgage and make overpayments on a monthly basis.

Thanks in advance

Try starting with a 25 year term and making some overpayment. However small. Although a 30 year term may seem attractive in the longer term it'll cost you far more than you may think.

englandcrew

Thanks for the reply. Does overpaying pay off the actuall amount owed or interest?

I was thinking of going for the 30year mortgage and do overpayments

englandcrew

Sorry I didn't see the second reply, I wasn't ignoring you. That does seem better but I was concerned that I couldn't extended it after the five years

originalmiscellany

England Crew - when you overpay on a mortgage, you have two options:
1) Pay less per month but keep the mortgage the same length, e.g. it goes from £600 a month to £590 a month but the length stays the same e.g. 25 years
2) Keep the mortgage the same but shorten the length of the mortgage, .e.g you still pay £600 a month but the length decreases down to 23 years.

Option 2 is what you should do.

jamesd

It's best - most flexible - to start out with a 100 year interest only mortgage and make additional payments whenever you like. This costs no more than a repayment mortgage if you pay the same amounts off but gives you a lot of flexibility to over or under pay whenever that's appropriate.

The term of the mortgage has no effect at all on the cost of the mortgage. That's set by how long it takes you to pay it off and just when you make those payments.

When overpaying you should have the monthly payments reduced so that your required spending goes down and you retain the flexibility to overpay as much or as little as you want. This applies whether it's a repayment or interest only mortgage and whether it's fixed or variable rate.

If you were instead to reduce the term you'd be throwing away the extra flexibility at no cost saving to you. Not worth sacrificing the flexibility for no gain.

If you can find a 30 or 40 year mortgage deal there's no problem at all to go for that. Nor to just keep the term the same at another 25 years when remortgaging after 5 years to increase your payment flexibility and reduce your risks.

englandcrew

Thanks for the replies, they have been very helpful

dimbo61

use " whatsthecost" and put some numbers in ! say £100K over 25/30 years at 5%
This shows that paying over 30 years and not 25 saves you about £50 a month ( cost of iphone or sky TV each month)
You will also pay off less over 5 years and may not drop onto a better LTV when you need to remortgage.
If you cant afford a mortgage over 25 years ( when you are earning good money!!) can you afford a mortgage in your late 50,s or 60,s