Short mortgage vs 25yr mortgage

Tildia

Hi all,

I saw a mortgage advisor recently who spoke what seemed like a lot of common sense at the time.

We had previously been looking at the (what we thought were) standard, 25 year mortgage, on the advice of parents to buy big and then not move too much. (as they did in their day, mortgage to the hilt and gradually pay off)

We had looked at various things with 25 year terms on houses around £350,000.

This chap sat us down and printed off first of all the interest vs capital payments for the first two years of a fixed rate.
He said that given interest rates are so low, he would want us to pay more capital off as after rates go up, everything will start to cost more.
Fair enough.

Then he said, what he thought we should do, is pay the same amount in repayments, but into a much smaller mortgage (£250,000) and at the same time, save a bit more before we bought to take our deposit from 10% to 15%.
He then printed off the same capital vs interest collum for a mortgage "his way" and clearly we had paid off lots more capital.

He then said, what we should do, is bring the monthly payments to around 38% of our monthly income, and to decrease the term based on that. So it ended up looking something like a £250,000 mortgage on a 12 year term with 15% deposit.
What he then said is because we would be "nailing down the capital" we could remortgage after a 2 year fix and already have paid off enough capital that we would drop down into the next LTV bracket ?20%

That, he said was enough that we could remortgage and pay everything off in 10~ years after that (12 ish total).

His plan for us, if we did this, was to then remortgage the first home, let it out, and use that capital as a deposit for our next house. And so on.


To me, this seems sensible, but he's the only guy we spoke to who said this, (admittedly the other guy was one in an estate agents).
It also flys in the face of parental wisdom that I wrote out above.

Can anybody offer any advice, or insight as to which is a better approach?

For info re future planning; partner and I are both doctors, both with jobs for next 10 years (then consultant job applications) My salary around £28k, my wifes salary around £48k and we expect this to very slowly increase year on year.

getmore4less

Do you want to become landlords?

What was wrong with the first plan go large?
Your pay will soon be covering it comfortably.

Fairly obvious a smaller mortgage with a higher payment will pay off more capital.

dimbo61

I would take a Normal 25 year term and overpay every month.
Split your spare money 50% into overpayments and 50% into savings ( cash Isa,s )
In two years see how much you have overpaid and also how much you have in savings.
You can then look at your LTV.
Moving home costs a huge amount in buying and selling costs plus stamp duty so buy the best house you can afford.

amnblog

All very scientific, but you are buying a home, not becoming a property mogul.

Therefore what you decide to borrow will primarily depend on the properties you find, how much you want them, and affordability, not a spreadsheet.

Goldiegirl

Can you get a decent house what you want to live in with the lower mortgage?

Or are the nicer ones, that you can make into a home, just out of that price range?

You are buying a home, not starting a business empire (unless that was your plan anyway), so buy a place that you can afford, and will enjoy living in.

Don't place limits on yourself just because of an advisors vision of your future.