Mortgage: 25yrs vs. 35 yrs? (FTB)

nakiwala123

Good thread!

I was thinking about this myself.

Thanks for the responses

DMFR

You can also claim back any overpayments you have made.

kingstreet

DMFR wrote: »

You can also claim back any overpayments you have made.

It would probably be safer to say you "may" be able to redraw overpayments. Many lenders don't allow you to do this and we had a thread this morning about Nationwide removing this facility from new accounts.

Harry_Boyle

kingstreet wrote: »

It would probably be safer to say you "may" be able to redraw overpayments. Many lenders don't allow you to do this and we had a thread this morning about Nationwide removing this facility from new accounts.

Plus it can 'lock you in' with your current provider, who may not be offering the best rates a couple of years down the line.

For example, if you had a £300k mortgage and made overpayments to reduce it down to £243k and then decided to move to a different lender, you would have to either apply for a £300k mortgage (which might blow your LTV and make your lending more expensive) or get a £243k mortgage and end up losing access to our overpayments.

Much better to maintain adequate emergency savings and view mortgage overpayments as non-refundable. Alternatively, get an offset mortgage but make sure that the sums add up because they are more costly than standard mortgages and you need substantial savings to offset if they are to pay.

brizza

Are there other considerations for the OP - are lenders less likely to accept a mortgage over 35 years than over 25 years? Or are they likely to offer worse interest rates? (I'm mulling over the same position as japmis)

kingstreet

No. Term helps affordability by reducing the monthly cost but has no impact on rate, or acceptance.

There may be one or two lenders with a maximum term of 30 years, but you'd know about that as soon as you tried to do a quote using a longer term.

brizza

kingstreet wrote: »

No. Term helps affordability by reducing the monthly cost but has no impact on rate, or acceptance.

There may be one or two lenders with a maximum term of 30 years, but you'd know about that as soon as you tried to do a quote using a longer term.

Thanks, that's reassuring.

getmore4less

kingstreet wrote: »

No. Term helps affordability by reducing the monthly cost but has no impact on rate, or acceptance.

.

Which is a sure sign that affordability is stretched if you need to go to longer term.

OK if the tight finances are short term, usualy pay rises will come in a short time.

look at £100k @ 4% on a repayment

25 year loan is £528. a 35 year is £443

If the 35y is a struggle

what does that mean in say 5 years time

25 year owe £87,093.80 35 owe £92,729.21

What about a rate change a 35 loan when you can afford a 25 @ £528 can take a rate of 5.36%


Even if you fix to give the security you need the longer term plan.

Same with shared equity, if you can't afford a full house you need to know you will at some time either have an increases in income or a windfall.

Combine both long term and shared ownership think twice.

EvieSaver

This could have an impact on the amount you'd like to overpay. Some mortgages have a limit on the amount you can overpay without charges. I have a fixed rate mortgage with a maximum monthly overpayment of £500. If you find it easy to pay your mortgage then you may find this £500 amount (with the lower 35 year standard payment) restricting. Obviously this would require a large amount of spare cash but as the years go by income from salary can change and make a big difference. Not all mortgages have this over-payment restriction though.

So base it on how confident you feel about your finances, if you think there may be months that bills could be a struggle then the 35 year option with lower monthly payments would be best.

sugarlily

I think I would nevertheless bear in mind that some mortgages cap the overpayments you can make to 10%.

But mr average joe :money: would be unlikely to want to pay more than that.