Am I better off overpaying or shortening the term

jas123

Hi
I owe 80k and am hoping to pay it off in around 10 years.
I am looking for a 5-10 year fixed rate that I can make overpayments on.
My husband doesn't feel very secure in his job so we like the option of payment holidays in case something happens.
My question is: Should I look at shortening the term of our mortgage and increasing the monthly payment or should I keep a longer term? I will pay the same amount regardless but which is likely to repay fastest.
Thanks
JAS:o

getmore4less

longest term you can get and overpay.

Might be time for an offset so you can get at the overpayments

Build up a buffer in case of income drop. Also have somewhere to put any redundancy.

Peelerfart

getmore4less,

Am I correct in saying that money in the savings part of an offset account does not count against you for benefit purposes ?

jas123

We are already in an offset but the rate is variable and starting to rise (RBS) so I was looking to fix for at least 5 years. I can get a five year fix for less than 4% that allows overpayments and payment holidays. We haven't really got any savings as we have been concentrating on bringing the mortgage term down.
Thanks

getmore4less

Peelerfart wrote: »

getmore4less,

Am I correct in saying that money in the savings part of an offset account does not count against you for benefit purposes ?

generaly not it still counts as savings.

With some lenders there are ways round this, eg with barclays you use the mortgage reserve.

sheslookinhot

I have recently been making a large (£500) overpayment and shortened the term. Prefered to see the end date nearer than the balance reduce.

getmore4less

jas123 wrote: »

We are already in an offset but the rate is variable and starting to rise (RBS) so I was looking to fix for at least 5 years. I can get a five year fix for less than 4% that allows overpayments and payment holidays. We haven't really got any savings as we have been concentrating on bringing the mortgage term down.
Thanks

payment holidays are not something to depend on if income is likley to be an issue

Lowest possible main payment(idealy low enough for loss of one income) and a heallthy reserve of cash.

with offset savings you can use the overpayments(stored in the offset) to pay the normal payments,

Overpaying when you have an offset is generaly(*) not a good idea, keeping the etra in thesvings is the better option.


* generaly but there are exceptions eg if benifits are going to be a factor.

dimbo61

Have a look at the 5 year offset fix with YBS at 3.59% fee £995
Have a long term as already mentioned but overpay the mortgage each month and save into offset account 50/50%
Stop paying into offset once you have £16K ( benefits ) and try to clear the mortgage asap ( 5 years+)

temba

Personally I would say keep the term long and overpay - this is because if your situation changes you aren't tied in to paying the amount you can currently afford, and can always revert back to a lower amount. Indeed, in my case, I think if I ran into difficulty, the fact I've overpaid for all these years means I could take a mortgage holiday I might not have been entitled to otherwise. Not sure if this is normal or not.

getmore4less

Problem is payment holidays, return of overpayments etc are all discretionary. and in some cases people are not awarethey have lost them.
(EG: if you moved off a BMR nationwide those benifit got lost)

Lowest possible normal payment and cash reserves are the way to go if income is likely to be disrupted. the great thing with offsets is the savings are as good as an overpayment but the money is still yours.

Thrugelmir

jas123 wrote: »

My husband doesn't feel very secure in his job so we like the option of payment holidays in case something happens.

Leave the term as it is and make overpayments. So as to allow you flexibility.

Payment holidays may be noted as authorised arrears depending upon your mortgage terms.