Reducing mortgage term to avoid hitting retirement

thewalrussaid

Hi,


First of all many thanks in advance for any thoughts anyone has re my query. I read this board a lot and have found out so much. I just hope I am not repeating something already posted.


My partner and I have a 2 yr fixed mortgage which expires at the end of September 2015. At that point we will have just short of 18 years left on the mortgage.


By October 2015 our LTV should be just below 60% (property was bought in July last year).


My concern is that my husband is currently 51 and so in 18 years will be 69. I am 17 yrs younger but he is the main earner. I spoke to our lender today (Halifax) and they said that if the term goes past the state pension age (which for my husband is his 67th birthday) they will want to see projected pension income to cover the last few years of the mortgage.


My concern is that I do not think my husband's projected pension income will be sufficient, however we can definitely afford higher mortgage payments. Therefore my plan was that we should aim to bring the mortgage term down to 13 years - this way the end date of the mortgage will be 2028 when my husband is 65 which is below his state retirement date.


To cut a very long post short will we still have to prove income in retirement if we cut the mortgage term down to 13 years? We do plan to pay down the mortgage in about 10 years but getting a good fixed rate next year would be helpful and I do not want to jeopardise that.


Thanks for your help.

Thrugelmir

You may need to prove that the mortgage is affordable if you reduce the remaining term. This is a quirk of MMR where lenders are held responsible for affordability assessments of borrowers.

Why not schedule the mortgage term to end just before your husbands 67th birthday. Allowing you the flexibility to make overpayments as and when you wish.

thewalrussaid

Thanks for that, so bearing in mind that 67 is going to be the trigger age cut the term down to just before so that we avoid that trigger but don't reduce the years more than we absolutely have to. So reduce 18 down to 15 as opposed to 13.

Thanks very much.

dimbo61

Just overpay each month.
Even when on a fix most deals and lenders allow 10% overpayment.
Use " whatsthecost" to work out how much extra you need to pay each month if you reduced the term down to 15/16 years.
If you can afford to pay more all the better.
We reduced our term from 21 years down to 10 this was pre MMR and our payment went up by £500 a month BUT it saved us £50,000 in interest.
You would not get this passed the lender now but you can still overpay each month without asking permission.

getmore4less

I would just overpay, chances are they would have never bothered.
even for a follow on deal with the current lender.

Checking with the lender they may have marked you for review.

if you can overpay why a fix a good tracker is often the best option.

lee111s

If you can definitely overpay then start by making your first overpayment today!

You'd be amazed at how much you will reduce the life of your mortgage by, and by the tens of thousands you'll save in interest.

thewalrussaid

Hi,

Thanks for all the replies, we are definitely planning on overpaying and are doing so now to ensure that we are within the 60% LTV range by the point of remortgaging.

I just wanted to make sure we could get the best fixed rate when we remortgage because I am quite risk averse and like to know what the mortgage payments will be. Once the remortgage is finalised we plan to overpay as much as possible to get the mortgage gone in 10 years if possible.

Thanks to all.

getmore4less

Fixing does not mitigate risk unless there is a max you can pay and the payments are already close to that.
As most fixes are short term they don't mitigate unless things change during that time like better LTV increased pay.

If you can afford more then you can know what you payment will be then you can look at how much goes in interest an paying down the debt.