Extended term

Interest-Ed

We're just reviewing our mortgage after a fixed period.

My husband is 50 and self-employed : would a mortgage lender consider a 20-year loan period is his case.

If this was the case would it be a good idea to go for a longer loan period enabling us to pay lower monthly payments. Then to put the difference into a savings package and make extra payments towards the mortgage annually.

Or is the better option to make the loan period as short as possible?

Many thanks for any views.

Scott

The shorter the loan period, the less interest you'll be paying, which is good.

Extending the term and putting the difference into savings isn't really going to save you any money, since the money you'll save will get taxed, your interest rate on your savings probably won't be as high as your mortgage rate and you'll still be accruing interest on the mortgage.

You'd be better either leaving it as it is, or maximising the fact that you might have some spare cash around now and pay it into the mortgage while it's available.

There are fixed products around that allow you to still make overpayments, if you have a look around you'll be able to find them, giving you the best of both worlds.

Basically, the more you pay off of your mortgage, the better, since it's less debt hanging over your head.

Fairdo_2

Only time it would be a good idea to extend the mortgage, would be if you are struggling on the current terms, or if you fear you will struggle soon. At least that way you would be able to make overpayments when times are better and hold back when tight. However, I would also say, if it is affordable, try to keep the term as low as possible, as SCOTT stated.

Interest-Ed

Thank you both for your useful thoughts. I'd forgotten to take into account that my savings get taxed too - more's the pity.

Scott

No problem.

It might be worth opening an ISA, though, they won't be taxed, if you do still want to take that course. I'd still offer my earlier advice, but it's an option. Forgot about those earlier.