Mortgage term

bluep

I am applying for a 29 year mortgage (I'm 35 so that takes me up to 65 and my husband is 45 so into retirement for him). I am getting real pressure from the advisers to reduce the term of the mortgage (both at HSBC and a building society I've seen today).

My logic is: whilst we could afford a higher monthly payment, I'd rather have the cash in savings incase we needed it (i.e. if I decided I wanted to change jobs or have another child) and overpay the mortgage on an annual basis (you can do this up to 10% of the outstanding balance on the mortgage I'm looking at). They keep telling me that makes no sense interest-wise and will cost me a fortune over the term of the mortgage.

I dont' intend to be in this house in 10 years time, I don't intend to be on this mortgage beyond the 5 year fixed term (we'll remortgage then and rethink the length depending on how much I'm earning then - if I get to the next level at my company, it would be double my salary now...). So comparisons of interest cost over 29 years as opposed to 25 or 20 years really aren't indicative.

Plus we like the flexibility - so if we want an extra holiday next year, we can...or we can make the decision to pay £4,000 extra off of the mortgage. This suits me far better than a set monthly payment £150 or £200 higher...or whatever it will work out at.

I don't understand why I am being pressurised when I have appropriate reasons for my decision (I'm relatively high up in financial services myself, buying a house 1/4 of the value they would lend up to and fully understand the interest ramifications).

Thrugelmir

Lenders have a duty now to base decisions on affordability. There is no way that a lender can crystal ball gaze to assess the future. So has to base a decision on today's facts.

kingstreet

If he's 45 attained and a joint applicant with an income needed for the amount you wish to borrow, you'll be asked for evidence of his income in retirement if you go past 70. Many lenders accept upto 70 as do-able even if there's an element of manual work.

I'd do 24 years maximum, unless you want to go through the pension forecast rigmarole.

Dave_Ham

This all boils down to lender selection.

There are lenders that will go to 70 years old without any unnecessary questions and some even to 75 years old depending upon employment.

HSBC and the Building Society you have selected are just working off different criteria and I suspect are both near on market leading and more sensitive.

All the best

bluep

Thanks for the replies. It's not that they WON'T go up to 29 years (well 27 in the case of the building society) but they are advising me that its a wiser financial choice for me to go for a lesser term mortage as I can afford the higher payments.

I could understand if they had criteria that prevented it....or thought we were high risk (both have said they'd consider an application lending us 4 times what we are asking for based on salary/affordability).

I'm not asking them to consider an application based on anythign other than our financial situation now and my husband's projected retirement income (all of which they have said is very low risk for them) - the potential lifestyle changes/factors I outlined above are my reasons for opting for a longer term for the next 5 years and then probably switching to a far far shorter term mortage, or overpaying considerably.

So it's not a selection or risk issue, its that the individual mortgage adviser is taking it upon themselves to explain to me the merits of a shorter term and CHOOSING this over a longer term. This is despite me fully understanding the ramificiations re interest cost and capital repayment over time.... That's what I mean by pressure. It's similar to if I was asking for a 3 year fix and they were trying to convince me to do a 5 year fix because they thought it was better. This is what I find frustrating - the "of course we'll offer you a 27 year mortgage but you'd really be better off doing this...so I'm going to take every opportunity to re-explain and try and convince you".

I understand the capital/interest split of repayments, I understand the merits of paying over 22 years rather than 27, but a 22 year comparison isn't that relevant to me, becaues I know this will be a "short term" mortgage as we'll change our arrangements when the fixed 5 years is up.

kingstreet

Lenders are gearing up for April, when they actually find themselves giving advice, on a mandatory basis, for the first time.

Brokers have been dealing with stuff like this for years, investigating borrowers' circumstances and working with them to establish what is reasonable and ensuring they understand the implications of their actions.

In the next year or so, borrowers should expect some serious "nannying" from lenders, who will decide what they can and can't do and impose how they should behave.

We're looking forward it it. Broker products will get better and direct products worse, as lenders try to train their staff how to give advice and actually look after borrowers' interests.

Thrugelmir

Doesn't really matter what you think or the advisers for that matter. The people that matter are the underwriters. That's where the decision is made. Lenders have a duty to assess affordability and lend responsibility. Which in finance terms could be best described as cautious in these litigious times.

kingstreet

Underwriting is another issue again.

They also have to get that right. TBH we're already geared up, ensuring payslips and bank statements match and analysing debits on statements, so we are ready to explain every entry.

It was quite amusing last week when I had Nationwide asking what the "Utility Warehouse" entry was on one of our client's bank statements.

They are going to have to wise-up, or get internet access in the next three months, to avoid such silly questions by conducting their own research.

All I could think of, at the time, was "What's taters, precious?," a quote from The Lord Of The Rings.

opinions4u

I'm in my forties.

The idea of having a mortgage in my 60s would make me ill.

I want the flexibility to semi-retire before then!

kingstreet

opinions4u wrote: »

I'm in my forties.

The idea of having a mortgage in my 60s would make me ill.

I want the flexibility to semi-retire before then!

Exactly. It's having the insight to be able to plan your own future which is the cornerstone of the advice process. What lenders are initially going to bring to this is fear. Fear that they will be held responsible if it all goes pear-shaped.

Lenders have never been willing, or able, to spend the kind of time with borrowers they need to get to know their circumstances and needs sufficiently well for them to advise and properly document that advice. The targets have always been number, rather than quality focused.

As a consequence, they've always shied away from it, preferring instead to put the onus on the borrower to pick what's right for them, leaving the lender with fewer consequences if it does go wrong.

bluep

opinions4u wrote: »

I'm in my forties.

The idea of having a mortgage in my 60s would make me ill.

I want the flexibility to semi-retire before then!

Oh believe me I have no plans to be in this property or under the cosh of a mortgagewhen I am in my 60s!!

Once we decide to start overpaying (probably after having another child and getting them into the school system), we'll shift our £1000 per month savings into overpaying the mortgage. As it happens, we were applying for an offset 5 year fix anyway....so the term is a bit academic.

All I see it as the difference between whether I am paying a £700 fixed monthly base payment plus whatever I put into my offset account or overpay via a lump sum or whether I'm paying a £900 fixed monthly base payment plus less savings into the offset account or less overpayment.... Frankly I'd prefer the flexibility - either is affordable.