existing customer switching to a new deal

swgl

My 2-yr fixed rate is coming to an end early 2014 and I'm planning on staying with Halifax, considering another 2-yr deal at 2.64% or 3.14%, depending on valuation I guess. LTV is 75-80%. Term: 23 years remaining.

Can I also reduce the amortization period at the time of the switch? say from 23 to 20 years? Or anytime after that? Thanks!

Foxy-Stoat_3

swgl wrote: »

My 2-yr fixed rate is coming to an end early 2014 and I'm planning on staying with Halifax, considering another 2-yr deal at 2.64% or 3.14%, depending on valuation I guess. LTV is 75-80%. Term: 23 years remaining.

Can I also reduce the amortization period at the time of the switch? say from 23 to 20 years? Or anytime after that? Thanks!

You can either overpay at the longer term or reduce your term and pay more, there will be no financial difference, assuming you don't overpay over £5,000 a year or whatever the maximum without penalty is. Overpaying gives you more flexibility.

dprice

Only shorten the term if you know you can meet the higher payments everymonth. If your not 100% sure leave the term at 23 years and overpay each month.This gives you the flexibility.

pjread

I got a 30 year mortgage earlier this year even though I'm hoping to clear it in 15 (or less if the next few years are good to me!).

Most mortgages these days seem to allow 10%+ overpayments during the fix, and whatever you want beyond that (or at time of a move of house or mortgage, of course).

I find it good to know I could just revert to the longer term if e.g. I found the years not treating me so well, as opposed to signing up to a 15 year mortgage and being stuck with a bad scenario if my employer went bust, or I went postal or something

That flexibility is largely 'free' so unless your mortgage is not that flexible I'd be inclined to stick to the current term but make higher payments.

swgl

Thanks all, however I thought that reducing the term also reduces the amount of interest payable over the life of the mortgage?

And my question was if I can reduce the term without paying some sort of penalty? Can I do that at any time? Now? Or I have to wait until the current 2-yr fixed runs out?

ps. Yes I'm allowed 10% overpayments.

Yorkie1

It's not worth the hassle of trying to do it during the fix, given that the fix ends in only a few months. Make overpayments as long as you have your rainy day fund of up to 6 months' outgoings already in place, and when you end your fix look at term then.

I'm not sure whether the lender would treat a request to shorten the formal term as a new application requiring full credit check - hopefully someone else would be able to advise if this is an issue for you (i.e. why you have chosen not to look at remortgaging elsewhere).

pjread

[QUOTE=swgl;[URL="tel:[URL="tel:63692202"]63692202[/URL]"][URL="tel:63692202"]63692202[/URL][/URL]]Thanks all, however I thought that reducing the term also reduces the amount of interest payable over the life of the mortgage?
[/QUOTE]

Well lets make up some round numbers just as an example, they won't quite work but should explain it

mortgage for 25 years - £800 per month
mortgage for 20 years - £1000 per month
mortgage for 15 years - £1200 per month

Sign up for the 15 years, you need to pay 1200 every month. no exceptions. if you get made redundant/something else affects your ability to pay that, you need to deal with it, possibly end out incurring costs in extending the term or damaging your credit file and incurring fees not making the payment, etc. 15 years later it should be clear (you owe nothing)

Sign up for the 25 years, you need to pay 800 a month. if you pay 1200 a month instead, in 15 years you owe nothing. in the course of that 15 years, there may be the odd reason you can't afford to pay 1200. No worries, just try to make it up later. 15 years later, it should be clear (you owe nothing).

The only real difference is the flexibility to you.