Options available - which is the best one?

goodmorningsunshine

I have had my mortgage for 2yrs 1 mth and now out of my fixed term, so having a look at my options for a new deal;

Had a play with the overpayment calculator but cant seem to work out which is best;

Keep same term and overpay each month OR

Reduce term and pay (mortgage + overpayment)

so in effect I will still be paying the same amount each month, just not sure whether to reduce the term time or not.

Anybody advise, a 2 yr, 3yr or 5yr deal? What would you go for?

My other thought was to buy a second property ?!!? and therfore would need to forget about the overpayments each month.

Caladan

A few questions:

1) Would you benefit from Re-Mortgaging to another lender now you're off your fixed period and presumably on the lenders SVR (Standard Variable Rate)? Take a look around and make sure you aren't paying a higher rate than you need too.

2) Why would you favour reducing term over regular overpayments/lump sum reduction?

The reason I ask the second is this - If you overpay on your existing Mortgage you are effectively reducing the term anyway (because although your contractual term remains the same you will effectively pay it off long before that), and as most if not all lenders calculate interest daily then you get the SAME benefit of reducing the term by overpaying WITHOUT the restriction of not being able to reduce your payments in future by reducing the term.

I don't know all lenders rules, but at least some will adjust your monthly repayment to match your original term if you have been overpaying. This is good because if your circumstances change and you need more disposable income you can just reduce your payments to match the original term.

3) How is buying a second property related to the above!?

Buying a second property is a completely different matter. Do you have the deposit to buy another property? Why do you want to do it? If you can afford to overpay enough to buy another property just like that I envy you sir!

Edit: You seem to be asking several somewhat unrelated questions without giving your reasons for them or some important background information. Might be worth elaborating your intentions a bit.

Yorkie1

Do you want to be in business as a BTL owner? Are you ready for the responsibilities that it entails? Do you have the financial resources if the T stopped paying or trashed the flat? Have you researched the market where you might buy the BTL, to see whether you'd get a decent return on your money? Would you have enough money for a 25% deposit?

These are the questions you need to be clear on before you decide to enter the BTL market.

Going back to your first question, are you likely to need to move in the next 5 years? Do you prefer the certainty of a fix rather than a lower initial payment which might move upwards in the future?

I have just changed product with my lender to a new 5 year fix. I like the certainty and am happy to have a higher interest rate now for that certainty. I went for 5 years because I don't see the point in fixing for a shorter period, with the possibility of higher rates being in place by the end of a shorter fix / extra possible expense in remortgage or product transfer after only 2 years. But those things may not be relevant to you.

I am overpaying and have asked to keep both payments and length of mortgage the same for the duration of the fix. Otherwise, I will get to the end of the fix and have a much shorter required term left in which to pay off the rest of the mortgage - i.e. less flexibility available in reducing monthly payments at that point.

goodmorningsunshine

Caladan wrote: »

A few questions:

1) Would you benefit from Re-Mortgaging to another lender now you're off your fixed period and presumably on the lenders SVR (Standard Variable Rate)? Take a look around and make sure you aren't paying a higher rate than you need too.

I am now at 3.99% but my fixed term was higher.

So even though I could afford to overpay by my allowed 10% in the 2nd year (My spare cash was used to renovate in the 1st year) they have now reduced my mortgage, so I have more spare cash to overpay.

2) Why would you favour reducing term over regular overpayments/lump sum reduction?

It just feels better to me to say I only have .. years :Dinstead of ++ years.:eek:
But I do know what you mean.

The reason I ask the second is this - If you overpay on your existing Mortgage you are effectively reducing the term anyway (because although your contractual term remains the same you will effectively pay it off long before that), and as most if not all lenders calculate interest daily then you get the SAME benefit of reducing the term by overpaying WITHOUT the restriction of not being able to reduce your payments in future by reducing the term.

Thank you, just wondered if I had missed some benefit by not reducing the term.

I don't know all lenders rules, but at least some will adjust your monthly repayment to match your original term if you have been overpaying. This is good because if your circumstances change and you need more disposable income you can just reduce your payments to match the original term.

Yes, mine already have reduced as the rate is now lower than I was paying in my fixed term, but it now means I can overpay even more.

3) How is buying a second property related to the above!?

Well obviously I would not have the spare cash to overpay or reduce the term if I went for a second mortgage, as I would not leave myself in the position if anything happened that I could not pay both for at least a 6-12 months

Buying a second property is a completely different matter. Do you have the deposit to buy another property? Why do you want to do it? If you can afford to overpay enough to buy another property just like that I envy you sir!

Well, I do have a deposit (some) but would get someone else to go in on this with me.

Don't get me wrong, we are talking small figures here, I dont earn a huge amount but am careful.

But I am such a dither, just like to know all my options before making a choice and then go for it.


Edit: You seem to be asking several somewhat unrelated questions without giving your reasons for them or some important background information. Might be worth elaborating your intentions a bit.

My mind is just jumping all over the place just now, trying to work out whats best - so sorry for the mumbo jumbo questions!!

Proud of the fact, viewed, bid, won,applied for mortgage, approved and collected keys all within 27 days.:D