Dumb mortgage length question

getmore4less

bobcratchit wrote: »

Brilliant! Thankyou you everyone for your responses. Much appreciated.
I'm self employed and so often it's a case of feast or famine and I do try and overpay when I can.
So it seems to be that the best way is to take a 25 year mortgage so that the monthly repayments are as low and when I can, overpay. And of course, taking into consideration early repayment charges.

I wonder therefore why people take out shorter mortgages if there doesn't seem to be any financial benefit of doing so? Or am I being thick?

You might want to look at an offset to manage the cashflow handy to have all that tax money saving interest before the tax man gets it.

needs disipline and planning

donfanatico

Talking about 65 pension age. So what happens if I will reach pension age shorter than 25 years so have to take a mortgage of 20years but then the repayments are too high

Any chance for us old timers to get on the property ladder at all?
Do any lenders do it over 65 years of age?

thanks

SuzieSue

donfanatico wrote: »

Talking about 65 pension age. So what happens if I will reach pension age shorter than 25 years so have to take a mortgage of 20years but then the repayments are too high

Any chance for us old timers to get on the property ladder at all?
Do any lenders do it over 65 years of age?

thanks

I think some might go over 65 if you can prove that you will have sufficient pension income. My friend spoke to RBS who said that they would go to 70.

Riggster

I would get the mortgage over a period of time you can comfortably afford, say 20 years. Then when your fixed interest rate period of 2,3,5 maybe 10 years ends, re-evaluate. If things went well in the intervening time, use our savings and only borrow what you need. If things went badly, borrow again on 20 years or so...

Riggster

And, more sensibly now I've read the thread properly, the shorter period you have your mortgage over, the less you pay in interest. If you can afford it, higher monthly payments and a shorter term would generally be best.

SuzieSue

bobcratchit wrote: »

I wonder therefore why people take out shorter mortgages if there doesn't seem to be any financial benefit of doing so? Or am I being thick?

I took out a mortgage over a short period (5 years) about 10 years ago because the product was the most suitable for me at the time (it was a 5 year fix). However, it had a 10% limit on over-payments so if I had taken it over a longer period I would have been restricted by the amount I could repay. The monthly payments were obviously very high, but I had 2 jobs at the time and lived very frugally for 5 years to ensure that I could make them.

kingstreet

SuzieSue wrote: »

it had a 10% limit on over-payments so if I had taken it over a longer period I would have been restricted by the amount I could repay

It's normally 10% of the outstanding balance, or original loan amount, so was yours 10% of the monthly payment?

If so, that's very unusual.

SuzieSue

kingstreet wrote: »

It's normally 10% of the outstanding balance, or original loan amount, so was yours 10% of the monthly payment?

If so, that's very unusual.

No, it was 10% of the outstanding balance but I wanted to pay more than that.

kingstreet

SuzieSue wrote: »

No, it was 10% of the outstanding balance but I wanted to pay more than that.

I must be being really dumb here, but if you accelerate repayment by taking a shorter term, the 10% is then 10% of a lower outstanding balance at the end of the year than would be the case on a longer term?

Did you go for a different product without the 10% limit then?

Tancred

bobcratchit wrote: »

Please excuse this simple question but not really been able to find the answer.

I'm looking to take out a new mortgage but i'm wondering if the length of the mortgage affects how much I will pay in the long run.

For example if i took out a 25 year mortgage of 100,000 and paid it back 5 years earlier, would i still pay for the 5 years off interest that would have accrued if it had run its full course.

Obviously the monthly repayments per month are lower on a 25 year than a 20 year so I was just wondering what the benefits were (if there are any) of taking out a mortgage for a shorter time if one could take out a mortgage for a longer period but have the option of paying it back earlier.

Hope that makes sense!

My advice is to be careful about wanting to overpay. When you start your mortgage you will need cash to sort things in the house and some buffer funds in case you lose your job or the car packs in. You will also need to think about your retirement and ensure your pension contributions are high enough, as well as planning for the children's university fees - assuming you have any children or wish to have any. A mortgage is a debt, but a very low interest and long term one, so it can be managed for a long period. You shouldn't be in a hurry to pay it off unless you receive a windfall. In my view, overpayment should be possibly considered in the second half of the term; I wouldn't dive in beforehand.