Extending Mortgage part-way through or longer term to start with?

hcow

Hi there,
Really hope you help with my question, as the internet is empty of advice!

So say you're signing up to a 22 year mortgage because you can afford it now, but in future, if jobs/family size changes (and interest rates rocket), you're thinking you might need to get payments down so expect to extend your mortgage term 10 years in.


I know you pay more interest if you extend, of course, but my question is:
Which is a better plan - start at 22 years, and extend by 3 or 8 years if you need to. Or start at 25/30 years, and overpay while we can at the start?


We're on a bit of a knife edge in terms of timing and decision making, so any help gratefully received.

Thanks in advance.
Hannah

HappyMJ

With banks now using affordability calculators to figure out how much you can borrow I'd set the mortgage term to the longest it can be then overpay when you can.

Lois_E

Depends whether the length of the term affects what deal the lender(s) will offer you. Also on how disciplined you're going to be about OPing if you start with the shorter term. Hope that's helpful in giving you a few things to think about.

suse*

No one can predict the future unfortunatley, all you can do is decide how much insurance and what sort might help you and take a gamble. You can get protection against redundancy and death or sickness but these things aren't cheap. When you sign up to a new mortgage it doesn't have to be forever either as you can remortage once your fixed deal or whatever runs out, but you can never tell what will happen.

When I bought my first house 6 months later I was in negative equity which I had never anticipated to happen that quickly, I had thought if the prices did crash at some point I'd have over paid enough to help balance it. I ended up stuck on a 6.5% northern rock mortgage with no way to refinance for years as with northern rock going bust too they couldn't make any changes to the rates or anything.

So all you can do is look at your income, if you are doing it for 2 people could you cope with just one if you had to? You need to go through all the plan b's you can think of really and even then a meteor might hit tomorrow.

I know this is doom and gloom but you have to think what might be most useful to you, can you take payment holidays? how much can you over pay, so could you pay the payments of the 22 year one but if something happened just change it to the minium payment of the longer term or less even then? Are you even in your forever home yet, if you have triplets do you have enough bedrooms so might have to move anyway.

Only you can go through all these situations and try and guess at how you would cope and adjust your spending / insurance levels accordingly. Hope the bank doesn't go bust or end up in negative equity like me, and just get one with things the best you can.

Thrugelmir

What's affordable to you. Extending the term at the outset merely adds thousands of pounds to the amount you'll repay.

If your interest rate was 7% how would that impact your budget?

Have a rounded budget that allows you to build an emergency savings pot, pay into a pension (even if just small amount) , that doesn't require you to borrow on credit cards.

If say a 25 year term is a comfortable period. Then take this option and overpay while you able, i.e. as if you were on a 22 term . This way you have the flexibility to reduce your outgoings considerably should the need arise.

Life is a marathon not a sprint.