Shorten term or overpay?

WiganAth

This question may have been asked before, if so I apologise for asking it again and maybe someone could direct me via a link if so.


Early next year our fixed rate is ending with approx. 8 yr 6mth left on the mortgage. In the past we have shortened the term but are considering overpayments instead and wondered if anyone had any advice on which may be the best route to go down.


Thanks in advance.

Suarez

I you just overpay to reduce the balance you will get flexibility if your circumstances changed with the lower monthly repayments.

WiganAth

Thanks for your reply. I can see what you are saying with just overpaying. Having had a quick read of some of the threads here it seems most people do that rather than shorten the term.


Again, thank you for taking the time to reply.

Lotti1982

Depends on how much you owe and any overpayment cap, a few years down the line you may get a little stuck if over paying, for example if you can only overpay 10% which a lot of mortgages can then on 10000 you can only pay 1000 overpayment in a year, when 5000 only 500 can be paid extra etc

JCL

I agree with the suggestion to overpay rather than shorten. Depending on circumstances would be worth looking at other mortgage providers who allow unlmited overpayments. I'm with First Direct for that reason.

edinburgher

I would point out that there are probably 3 different options to consider here:

• Reduce term
• Overpay (reduce term)
• Overpay (reduce monthly payment)

Just mentioning the differences as there were a few suggestions that could confuse (for example, if you overpay but reduce term, your payments would remain the same).

If you go for one of the overpayment options, be sure to specify which you want to go for with your lender.

Mentox

Hi JCL,


I for example could overpay with 500 a month but was in the fortunate situation to have more money available.


What I did was reducing the mortgage term and kept overpaying the 500. In the event things wont go as planned I can skip the 500 overpayment.


See my thread: https://forums.moneysavingexpert.com/discussion/4444529