Long term and overpay vs shorter term

Telhearne

Hi All,

Scenario 1 - £1000 a month over a 20 year term
Scenario 2 - £900 a month over a 25 year term and over pay £100 a month

This may be a bit of a silly question but just want to be sure. With regards to the above scenarios is there any difference in the interest charged?

The reason I ask is because I am going to apply for a 5 year fix and want to pay as much as possible. My partner and I will look to start a family in a year or 2 so would ideally go for a longer term and overpay. Then when baby is born I can stop the overpayments. Therefore giving greater flexibility.

Thanks

kingstreet

None, whatsoever.

You'll owe exactly the same amount whenever you "snapshot" the account balance.

dimbo61

Your Age is important!
If you are 40/41 then a 25 year mortgage takes you over 65 and into retirement so they then want to know all about your pensions!
If you take the longer term and over by £100 a month that should be fine.
Most fixed rate deals only allow 10% overpayments in a year so check the T&C,s carefully.
Have you considered offset mortgages? I agree with your thinking about 5 year fix

Telhearne

Thanks for the replies!

dimbo61 - Age is not a concern as my partner and I are 28 and 26. As for overpayments the mortgage will allow me to overpay £10,000 per year.
The mortgage I am applying for is 5 year fix is at 2.84% for £167,000. I am not sure if there are any offset mortgages that beat that rate? I just wanted to make sure I would not lose out by lengthening the term and overpaying as it is my intention to get it paid off asap!!