Length of term

crofty11

Some advice please - we've decided to go with Nationwide 4 year flexclusive 75%ltv, appointment with the bank on tuesday to apply.
Borrowing £120K

From the outset we are planning to overpay. We were going to go for 22 years - monthly payments £603. In doing some sums to see if we are going the right way, if we go for a 25 year term - monthly payments £550, and overpaid by £50 every month, overall we would pay less interest then the 22 years.

So am i correct in thinking it is better to go for the longer term (to safeguard against rate increases in the future) in our situation where we plan to overpay?

Welcome all thoughts
many thanks in advance

ViolaLass

crofty11 wrote: »

From the outset we are planning to overpay. We were going to go for 22 years - monthly payments £603. In doing some sums to see if we are going the right way, if we go for a 25 year term - monthly payments £550, and overpaid by £50 every month, overall we would pay less interest then the 22 years.

You sure about that? Sounds unlikely.

crofty11

I think so, using the calculators, unless i'm missing something??

120K over 25 years - total cost £165,463
120K over 22 years - total cost £159,616

120K over 25years with £50 monthly overpayment - total cost £159,354

mortgages are so confusing!

ViolaLass

If you give me the interest rate, I'll run it and see whether I get the same numbers.

amnblog

The more you pay sooner the less you pay overall.

If you have the discipline to make the overpayments with the longer term this does give you a lower committed payment which could prove useful later.

crofty11

Thanks ViolaLass - 2.69%

amnblog - thank you for confirming my thoughts. If we have £600 monthly we wish to commit for the mortgage - the 25 year term is what we should choose, overpaying every month.

ViolaLass

I've assumed no fees (though for the deal you've mentioned, I suspect that's wrong) and I get:

25 years - £550 a month - £164968 (total)
£600 a month - £159354 (total)

22 years - £603 a month - £159121 (total)

which is as I would expect (the highest monthly amount means the lowest paid overall).

Did you mix two numbers up maybe?