Reduce the Term or Reduce the Repayment?

Caltha

I've been overpaying my mortgage for a couple of years now and have always gone for the 'reduce the term' option.

This has brought my mortgage down to 140,000 with 15 years remaining.

If I continue overpaying this way the mortgage should be gone in approx 7 years time.

This has seemed like the best option for me personally so far.

However I'm having a re-think, particularly as the 'job front' is always uncertain.

If I switch to 'reducing the overpayments' option this would bring the monthly payments down to a level that I could sustain (with a lodger) whilst trying to find more work, etc.

Based on my figures if I change to the later, yet continue to make the same 'total' payment (including overpayment) each month, the end date still comes out the same. Assuming interest rates blah blah and the rest...

My question is;

Are there any obvious disadvantages to changing to the 'reduce the payments' option that I can't see?

I'd appreciate your comments and advice please.
Caltha:)

mij544

Don't forget you can can normally make "ad-hoc" overpayments penalty free up to 10% per annum on many mortgages which means you could reduce the monthly payments, but still reduce the outstanding amount if you find yourself with some spare cash.

Check your mortgage offer to see, but if so, this could be the answer.

Caltha

thanks for your reply mij55,
I'm out of the fixed deal period and can overpay any amount without penalty. Its a tracker at 2.5%, so I'm on a good deal at the moment from that point of view!

I'm slowly coming round to the idea of reducing the payments, and having a mortgage that I can pay, rather than risking it and going 'hell for leather' to get rid of it!

If I stay with the reduce the term option the monthly payments would be way too high to sustain even in the short term if I'm out of work.

jimbo_the_jetset

Are you by any chance with Nationwide then? I am and I know that any overpayments can be taken back at any time and/or payment holidays can be taken if you have overpaid. So you may be able to overpay while you can and if work keeps rolling in keep overpaying or if work runs dry reduce or not pay at all.

Caltha

Hi Jimbo,
yes I am with Nationwide. I'd forgotten I could take a payment holiday, thanks for that. That would also take some of the pressure off.

I think I've made my mind up, so will log onto nationwide later and switch to reducing the payments.

I keep my eye on current mortgage deals as I'm now out of the fixed period, but I don't really see anything that offers a significant advantage to the current deal of 2.5%, with the current flexibility of this mortgage and not being tied in.
Ta :T