New mortgage deal confusion

edited 28 July 2013 at 10:44AM in Mortgage-Free Wannabe
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frustinfrustin Forumite
23 Posts
Part of the Furniture 10 Posts Combo Breaker
edited 28 July 2013 at 10:44AM in Mortgage-Free Wannabe
Hi,

Just about to end our 1st (in the this house) mortgage rate with Northern Rock. Currently paying £1936 a month over 28yrs.

Went to see our mortgage adviser yesterday and (although not the lowest rate) Nationwide look to be our best bet, based on an 85% LTV. This deal will bring the cost of repayments down to £1517.60 on a 3.39% rate over 28yrs.

We would like to make overpayments to the tune of paying of the mortgage in full in 15yrs. Nationwide have recently said you can pay back as much as 10% overpayments each year.

The way I see it, I have two choices:

1. Get the 28yr fixed as above and overpay by £814 a month
2. Reduce the mortgage term to 15yrs and have a monthly repayment of £2334

Number 2 seems to be more high risk (for me) as i am stuck with that repayment come what may, at least i can decide not to pay the overpayment if money is tight for some reason.

Is number 1 my best (only?) choice?

Replies

  • SG27SG27 Forumite
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    Definitely number 1! What if interest rates go after the fixed rate ends? Keep the flexibility. You never know what will happen.
  • frustinfrustin Forumite
    23 Posts
    Part of the Furniture 10 Posts Combo Breaker
    Indeed. I sort if knew 1 was the right way. I wasn't sure if there was a better way of doing it, cheaper or smarter.
  • edited 28 July 2013 at 3:34PM
    BeckyyBeckyy Forumite
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    edited 28 July 2013 at 3:34PM
    Unless you're earning big bucks I think youd be crazy to go for option 2.

    Go with option 1 but treat it like option 2 then if you have a rough month or an emergency you can keep back some money.

    On what basis did (s)he recommend Nationwide over the lower interest rate product? Was it the option to OP?

    ETA: Any particular reason for having a 28 year term?
  • frustinfrustin Forumite
    23 Posts
    Part of the Furniture 10 Posts Combo Breaker
    already on 28 term and we're young enough to keep it.

    big bucks - we're on enough to have that sized mortgage and make that size overpayment.

    The lower interest mortages were "discount" mortgages. After the fiasco with Swinton who wrote to their customers (including my friend) to say the discount was finished and they were now paying another 2% midway through, I didnt want that to happen to us.
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