Advise me please....mortgage free wannabes 19 February 2014 at 2:40PM in Mortgage-free wannabe 14 replies 972 views

Funkeydunk

Okay my mortgage started in 2006 at £215k
It's now £160k

I'm in a blessed position to pay £20k off my mortgage next month, but there is the question:

"Do I leave my payment the same (post £20k) and reduce my term" OR
"Do I leave my term and reduce the monthly cost"


Help, which is better?

Mrs_Rachel_Trelfa

Reducing the term will save you interest (try looking at the calculator to see how much) as you will not be paying interest on that 20k. Reducing the monthly repayments will mean that you will not save any money, but you ate reducing you contracted monthly commitment so it is useful if you think you might struggle in the future.

Check your terms and conditions in case the money will set off ERC?

Geek4Life

Personally i would reduce the term to save on interest but as the above user stated it depends on your confidence that you can comfortably keep up your monthly payments in the future.

Funkeydunk

Great feedback guys thanks

HitTheBeach

I've just paid 21k off my mortgage to reduce the term. Yesterday in fact.

For me, the quicker I can become debt free the better, so reducing the term was key.

My advice, for what it's worth, is to reduce the term. Paying a smaller sum but for just as long would make me feel just as trapped.

pjread

it's over a 10% overpayment so be sure you won't trigger ERC's - depending on rate, it may be better to repay 10% then wait until the 'anniversary' to overpay the rest.

Personally, my OP's reduce the contracted payment. it adds flexibility for now, and the term isn't really fixed anyway unless you stick with one lender/mortgage forever. That said, I'm only one year in (of a 30 year term, but 15 year projected "end of mortgage")

Alchemilla

Geek4life sums it up well. Lucky you.

themull1

I overpay, and keep the term and the dd's the same, that way im also slightly overpaying on the dd's each month, as well as the overpayment amount.

Funkeydunk

The thing is, I only pay 0.63% above base rate, 1.13% awsome eh, as I'm on a base rate tracker, also I can make unlimited overpayments with no impact. So I think I'll pay off as much as I can in a lump sum, then overpay, HSBC automatically reduce the term on this mortgage so it's simples ...squeak. Thanks for all the advice I really do appreciate it.

edinburgher

You have a 1.13% rate?? That's awesome, I wouldn't be overpaying if I was in your situation, keep it in savings and you're being paid to have a mortgage (so to speak)

Funkeydunk

I know, but I really want rid of this, mortgage.