Mortgage strategy

DreamerFTB

We are planning to go for a 2.39% lifetime tracking BOE 15yrs with HSBC.
With unlimited overpayments, our plan is to overpay as much as possible the first years when the capital outstanding is high, and anyway continue with overpayments as much as possible.

I was now wondering what is the best duration for the mortgage with this strategy. I was thinking to go for a 15 years but then, when changing this value in the HSBC website, like 20yrs or 25yrs or 10yrs, I noticed that all the terms were the same! So same interest rate and same fees.
To me it looks wiser to go for the longest one (i.e. 30 years) so we have very low monthly payments, that we overpay anyway so the duration will never be 30 years (with overpayments we are planning to do, most likely around 10 years). But at least we have a small monthly payment if anything bad happens in the next few years (who knows?).

So my doubts:
- why isn't HSBC changing the interest rate based on the duration? Maybe just an inaccuracy of the website?

- if they keep the same terms regardless the duration, is there any disadvantage doing the longest one, taking in account our strategy? Maybe I am missing something.

DreamerFTB

I changed a bit the original post, maybe it wasn't very clear.

ACG

Interest is charged on the amount owing.
The rate is based on the risk to the lender (ie how much the property is worth and how much you want to borrow) typically that goes in bandings of 95% of the property value, 90%,85%, 75%, 65%,60%.

The lower the banding the better the rate (usually).

So term does not come into it when deciding on what rate you go for.

Pros of going over a longer term are that if times become tough you have lower payments. Cons are that you need to be commited to overpaying otherwise you will end up with a 30 year mortgage rather than the 10-15 year you were planning on.

kingstreet

If it's a lifetime tracker, its for the whole mortgage term, as long as you want that to be. You don't get a different rate because you pick a different term.

Take the term that suits affordability best for you and your circumstances. Shorter if you aren't disciplined enough to make the promised overpayments, longer if you are.

Your call.

DreamerFTB

Thanks guys!

I think I'll go for the longest, given that, as you also say, I don't see other drawbacks other than be disciplined on the overpayments. I like a lot the idea of small monthly payments that we will overpay a lot, but we can avoid to overpay if something bad happens.

We are quite disciplined financially, so I think this suits us more.

Thanks again!