Remortgaging - Overpay or Reduce Term?

howbal

Hi

Please could someone give me some advice?

We are in the fortunate position now we have paid off most of our debts to be able to overpay on our mortgage (still 22 years left!) We are planning to remortgage and i cant work out if it will make a difference to the cost if we leave the term as it is and overpay each month or reduce the term (and hence increase the min payments) and just pay that each month. We'll pay the same each month either way, but i'm not sure if one would reduce the total interest we may more than the other. If it wont cost us any more we will just overpay becasue that will give us more flexibility in the future.

Thanks for your help.
Liz

LisaT186

Pretty similar, down to personal choice really and how disciplined you are about overpaying. For eg £100,000 on a 5.39% fix until 2022 (long one!) repayment over 22 years is £647.51 a month. Overpay by £100 a month and it will be clear in 17 years and 1 month. Set term to 17 years and the monthly payment is £749.63 so £102.12 more or £432.48 in 17 years which is more or less the one month payment. You could try and get very clever with overpayments on daily interest and start making the overpayments at different times to save a few pence, but not a huge amount of difference.

howbal

Thank you, having numbers behind it makes it really clear.
:T

LisaT186

If you want anything more specific I can try. Its only a basic calculator and a lenders own will be more precise, but it shows what happens!