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Mortage Advice / Over Payments

Hello
I have recently been to see a Mortage Advisor because I am buying a house with my partner. We are FTB and the house is a collosal £167,500. We have a 10% deposit.
The advisor said we may be better to go for a 30 year mortage and then make over payments. He said if we pay an extra £100 a month for example then the mortage company wouldn't mind if we asked them.
However, they would mind if we went for 25 years and then wanted to under pay to make it 30 years.

Another way we could do it would be to save the £100 in a high interest account and pay a lump off at the end of the mortage. I am a bit confused so any advice would be welcomed.

Thank you!

Comments

  • Mr_helpful
    Mr_helpful Posts: 3,233 Forumite
    Must admit Im confused as well unless the lender says you cant afford 25 yrs but your own budget says you can. Its a bit like saying why not have an even cheaper interest only mortgage and overpay that. Nothing wrong there as long as you do overpay it but why not have a flexi if your parments are likely to be irregular.
    I like to give people as many choices as possible to do what I want them to. (Milton H Erickson I think)
  • danjberry
    danjberry Posts: 180 Forumite
    i think what your avisor means is that if you go for a 30 year term you can always stick with what your omrtgage lender says you have to pay but you have the option of overpaying. while if you go for a 25 year term and you cannot pay the full amount one month then you will have a missed payment on your credit history. He/She just seems to be on the cautious side. Is the payment just inside your budget? i assume it is a repayment mortgage?
  • TEDDYRUKSPIN
    TEDDYRUKSPIN Posts: 1,528 Forumite
    Nah. What the mortgage advisor is saying is that the lender will not your approve your application if you go for a 25 years term. But if you went for a 30 years term and also over paid, it will be the same as going for a 25 years term. And most of all! It will be approved.

    Do not put £100 in a high interest account as it will not be the same as cutting down the interest on a mortgage!!
    Motto: 'If you don't ask, you don't get!!'

    Remember to say thank you to people who help you out!

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  • snuffy
    snuffy Posts: 49 Forumite
    Thanks for the advice.
    I think what the advisor was trying to say was "as you are a FTB and the house needs doing up, you may wish to chose 30 years so you have a bit more cash - if when you are comfortable to do so, contact the lender and ask to pay more off every month, subsequently making it into a 26 year mortage or whatever it may be etc"
    We are going for a 2 year fixed, probably with a massive arrangement fee :( is it worth it do you think?
    It's for a repayment mortage and the advisor worked it out that we need 3.6 times our salary to achieve the mortage.
  • why are you going ahead with a 2yr fixed rate mtg? whats going to happen to your incomes over the next 2yrs that means you will be able to afford rates if they were to have gone up?

    you have to also factor into the possible costs in 2yrs time to either change the product to something else, thus avioding going on the lenders standard variable rate, or even moving the mtg to another lender. Dont just check the upfront fees (i.e arrangement fees and admin fees) but also how much the lender will charge you for leaving (deeds release fees etc)

    Its important not to over stretch yourself when taking out a mtg, thats the reason they have suggested you have the term over 30yrs, this means that if you have money left over at the end of the month then you may be able to pay this off the capital, word of warning though, make sure that the mtg product you go for doesn't charge you ERC's (early repayment charges) if you pay more than you are supposed to.
  • snuffy
    snuffy Posts: 49 Forumite
    why are you going ahead with a 2yr fixed rate mtg? whats going to happen to your incomes over the next 2yrs that means you will be able to afford rates if they were to have gone up?

    you have to also factor into the possible costs in 2yrs time to either change the product to something else, thus avioding going on the lenders standard variable rate, or even moving the mtg to another lender. Dont just check the upfront fees (i.e arrangement fees and admin fees) but also how much the lender will charge you for leaving (deeds release fees etc)

    Its important not to over stretch yourself when taking out a mtg, thats the reason they have suggested you have the term over 30yrs, this means that if you have money left over at the end of the month then you may be able to pay this off the capital, word of warning though, make sure that the mtg product you go for doesn't charge you ERC's (early repayment charges) if you pay more than you are supposed to.

    If I stay in my current job then I get an annual increment plus cost of living. My partner gets cost of living plus a pay review. If 2 year fixed isn't the way to go, then I'd be interested to know what is!
  • if i knew what was going to happen to interest rates then i would not be sitting where i am now, i would be on a beach in barbados. lol

    if you're happy that the rises your going to get in your incomes will still mean you can afford your mtg payments if rates were to go up, then a 2yr may be ok. Its a gamble which ever fixed rate you go for. Incidently what lender have you been advised?
  • snuffy
    snuffy Posts: 49 Forumite
    thats what I mean - its a gamble. we are going to go for 2 years so we can assess what happens then. There will be a general election on the cards for 2009 so maybe it won't be such a bad thing! I'm not sure a tracker would help us because rates are bound to go up (according to the people in the know?) but the low arrangement fees do entice me in!!!
  • the bank of england that set rates are supposed to be independent of the government, so a general election shouldn't have an impact on rates. I too can see rates increase, not much though, perhaps another .25%, but again what do i know, im just a humble mtg adviser:rotfl:
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