Over-pay or shorter mortgage

KnightSmile

Hi all,

I am a first time buyer currently looking at getting a mortgage. I have checked out moneysupermarket and found one of the best overall deals for my circumstances is a first direct mortgage.

I'm keen to get rid of my mortgage as soon as possible and could afford to take out 15 year mortgage rather than the standard 25 years deal although this obviously cost more per month. My dilemma however is that it seems this particular mortgage product has unlimited overpayments without charge, does this mean that I could in fact get a standard 25 year mortgage and pay the same amount I would have for 15 year deal but have the flexibility to choose to pay my minimum payment? Are the any downsides to this?

Thanks for your help!

KS

[Deleted User]

You would need to read the detailed terms and conditions, but yes it sounds like it.

If you take the shorter term mortgage you would be committed to that payment, even if your circumstances changed. A longer term mortgage that accepts overpayments would give you the freedom to overpay when you can, but also have a lower monthly commitment if your circumstances were to change.

Not always, but there may be an ERC (Early Reypayment Charge) if you were to repay (completly) the mortgage during any introductory/fixed rate period - that's why I have said to check the details of the terms and conditions.

HTH,

D9

Nikon_Les

The last time I changed mortgages I was in a similar position and asked the advisor to find shorter deals. He advised keeping the term the same but overpaying as you have a lower monthly commitment but still essentially pay the mortgage off in the same time.

lee111s

If the lender permits you to overpay then take the longer term. You're not then obliged to pay the higher rate should something happen like a job loss or if you simply needed a bit extra cash for some home improvements/emergency/car repair.

I would however suggest that you build up a savings pot of 3-6 months salary before you start to overpay.

dimbo61

If you are looking at First Direct then check out the offset mortgages!!
Great place to keep your emergency pot?

KnightSmile

thanks for the responses.

I dont really know if an offset would be worth getting if I only save 100-300 per month. are there calculators for that?

KnightSmile

another question... on most mortgages it says you can pay up to 10% of the mortgage debt without incurring a charge. Is this 10% extra of your monthly payments or 10% of the total debt?? Using a £100,000 mortgage as an example can somebody put figures on this?

Yorkie1

Again you need to look at the T&Cs but it is often 10% of the outstanding balance at the start of the calendar year or on the anniversary of the mortgage.

So in year 1 you could pay max £10K.

At the end of year 1, if outstanding debt has become £97K then you can only pay £9.7K in year 2.

And so on.

kellyt86

Some lenders (nationwide I'm going with) let you overpay 10% of total loan every 12 months so on 100k mortgage that's always upto 10k a year regardless of remaining amount.

But obv check it all carefully, and maybe different products will have different rules.

Would defo go for overpayment rather than shorter term, much more flexibility should something come up!

hcb42

25 years isnt standard of course, you can get a mortgage for any shorter term you want..

JournalGirl

KnightSmile wrote: »

Hi all,

I am a first time buyer currently looking at getting a mortgage. I have checked out moneysupermarket and found one of the best overall deals for my circumstances is a first direct mortgage.

I'm keen to get rid of my mortgage as soon as possible and could afford to take out 15 year mortgage rather than the standard 25 years deal although this obviously cost more per month. My dilemma however is that it seems this particular mortgage product has unlimited overpayments without charge, does this mean that I could in fact get a standard 25 year mortgage and pay the same amount I would have for 15 year deal but have the flexibility to choose to pay my minimum payment? Are the any downsides to this?

Thanks for your help!

KS

In short, Yes and No

We have the lifetime tracker offset mortgage with FD. We overpay significantly bringing the overall term down (and there is no ERC), but if we do need some money for something, we can just draw it back with absolutely no penalty.

I am still looking for the downside....and several years in, I just can't find one. :rotfl: