What to do!?

tinofpeas

After a little bit of help .......we are planning on coming out of our 5 year fixed to switch to a 2year fixed with the post office

This is where I'm not sure what will be best to do.....

Do we keep our term the same and make over payments?

Or

Do I reduce the term to keep my payments the same?

Our ltv is around 50% taking into account our current erc

Thank you in advance

tinofpeas

Could anybody help???

lee111s

If you keep the term the same and make overpayments, you'll achieve the same result as dropping the term and increasing the contractual payments, however, to do so requires a lot more dedication and discipline!

By having lower contratual payments it also means you have more flexibility should your income be reduced temporarily or possibly longer depending on circumstancs...you just never know what can happen in the future.

Also, why are you only fancying a 2 year fix? Are you planning on moving after those two years? If not and it's your forever home, it might be worthwhile looking for a longer fix given the talk of a base rate rise soon. That coupled with high fees when switching lenders often make lower interest short fixes a bit of a false economy. It does depend on how much you owe among other factors.

libf

General wisdom is that if you can be strict about keeping to over paying then it's better to do so and keep payments lower for flexibility.

If you're likely to not keep to overpaying and want to shorten the term then doing this forces you to stick with the higher payment limit.

Be careful of fees if you overpay too much, and check if the lender will automatically adjust your payments as a result of over payments.

tinofpeas

Thank you

Yes this is our forever home, I don't plan on moving anytime soon!

I will look into a longer term fixed and see what I could achieve with them.

lee111s

With that sort of LTV you should be able to get a 5 year fix at under 3%. If it's a forever home, don't discount a 10yr fix. I think Nationwide offer a rate not much above 3%.