Where to start? Advice please

lydriver

I had thought on getting a mortgage over a longer period to reduce the monthly payments and overpaying it enough to get it paid off within the 10 years or whatever
but there's limits on overpayments on the ones I've seen....

one says 'Flexibility to overpay by up to 10% per year', so using the overpayment calculator on here.... if I add 10% of the standard monthly payment as a recurring monthly payment that should give the min term the mortgage can be paid off in....is that right?
if so then taking 40k over 15 years would mean the earliest it could be paid off is 1year 8 month earlier??

or am I just looking at the wrong mortgages?

Dird

lydriver wrote: »

..to work out how much renewing a 2 year deal will cost overall do you assume that you'll get the same interest rate/fees/cashback each time you renew?

With your 10 year fixed at 3% I guess you have a good LTV. Assuming the equivalent for 2 year is currently 1.5% then chances are you'll do better. It's also better for paying early.

My mortgage will be £80k, my plan is 2 year fixed with 10% overpayments but I'll save at the same time. When the 2 year ends, I'll pay in my extra savings (£10-20k hopefully) then switch to a new 2 year fixed deal. If you're restricted by 10% overpayments this will work well for you too.

I've done my guesstimates on my current application's %rate and their current 2 year renewal rate, it might increase a little in 2 years but probably nowhere near the current 10 year %.

Also, avoid the high fees.

ViolaLass

lydriver wrote: »

I had thought on getting a mortgage over a longer period to reduce the monthly payments and overpaying it enough to get it paid off within the 10 years or whatever
but there's limits on overpayments on the ones I've seen....

one says 'Flexibility to overpay by up to 10% per year',

They mean 10% of the total outstanding, not 10% of your monthly payments.

libf

lydriver wrote: »

I had thought on getting a mortgage over a longer period to reduce the monthly payments and overpaying it enough to get it paid off within the 10 years or whatever
but there's limits on overpayments on the ones I've seen....

one says 'Flexibility to overpay by up to 10% per year', so using the overpayment calculator on here.... if I add 10% of the standard monthly payment as a recurring monthly payment that should give the min term the mortgage can be paid off in....is that right?
if so then taking 40k over 15 years would mean the earliest it could be paid off is 1year 8 month earlier??

or am I just looking at the wrong mortgages?

The 10% over payment limit usually only applies during the fixed portion, so fix for less time and you can make more overpayment sooner.

Also, are you really sure you want to stay in the same place for 10 years? There's normally a penalty charge for settling up within a fixed period, and a lot can change in 10 years.

lydriver

I'm still trying to piece everything together (my head is full of numbers and facts!) but if it's almost impossible that the interest rates will soar then I'm starting to look at shorter term mortgages
I suppose that is an advantage of taking over a longer (overall, not initial rate) period and overpaying.

Dird

Wow, 10% limit is normally 10% of the mortgage total? I thought it was 10% of what you're required to pay during that year

lydriver

Found this... http://www.theguardian.com/money/2013/aug/14/remortgaging-overpayment-deal-real-terms
looks like it varies depending on the lender

For example, at the Nationwide building society (BS), you can male overpayments of 10% or less of "your original mortgage balance per mortgage anniversary year" without incurring an early repayment charge. So the most you would be able to overpay each year would be £17,000. However, at Britannia, you can overpay by up to 10% of "the previous year-end balance of your mortgage each year", so the amount you can overpay goes down each year because the amount you owe also goes down each year. Another approach, by HSBC, is to let you make overpayments of 20% of your standard monthly repayment rather than linking overpayments to the outstanding loan amount.

PixelPound

ViolaLass wrote: »

They mean 10% of the total outstanding, not 10% of your monthly payments.

I was about to point that out :rotfl:

If you paid 10% extra each year, as single extra payment at end of each year i.e. on month 12, 24, 36 etc then just overpaying for first 6 years (£3700, £3100,£2600,£2000,£1600,£1140 (rounded payments down to ensure no ERC penalty)) would reduce term from 15 to 9 years. If you split the repayments to monthly, you save more interest so paid off earlier. Based on a 10 year fix at 3%