Advice on mortgage type Please

isanat

Hi,

I have a question about which is the best type of morgagte to get if you plan on over paying alot each month but just incase a certain month you dont want to over pay you can still pay normal monthly payment.

I am just doing my research as this year i will be looking to purchase my first house in price range of £55K - £70K and of this month got a deposit of £10 hoping for it to be £15 by july.

Me and my partner really just wanted to pay it of with in 3 years as we can easily live on one wage while other wage is used to clear mortgage.

Please any advice would useful on the idea we have ????

Thank you in advance.:A:A:T:T:A

Petal88

Most mortgages have a standard rule of only allowing overpayments that amount to 10% of the mortgage amount per year. If you intend on paying it off in 3 years you therefore need to specifically find a mortgage which will allow you to make unlimited overpayments.


However - rather than paying it off and incurring early repayment charges and missing out on savings interest, a lot of people are aiming to be mortgage neutral instead, keeping savings the size of the outstanding mortgage safe in a high interest ISA/savings account, as economically it probably makes more sense than paying the mortgage off early. E.g. if your mortgage has an interest of 2% and you can get 5% in savings then paying the mortgage off early might not be the best option. Something to think about!

isanat

that is a very good point and will be took into consideration because if anything we could do both over pay by 500 and save 800 pm..... (an by way we was thinking of a term of 20 years , just in case anything went wrong we got low affordable payments but with goal of paying with in 4 years)

we have been advised that tracker mortgages are good because their is no limit to what you can over pay i dont know how true this is ???????........

Petal88

Hi again,


It might be true for some but isn't universal for all trackers - in fact I don't think there's a particular "type" of mortgage that allows unlimited OPs across the board. The easiest thing to do to find out is to speak to your bank or ideally a mortgage broker, as they'll be able to present you with all the options out there.


To back up what I just said - the HSBC tracker mortgages definitely don't seem to all allow unlimited OPs: http://www.hsbc.co.uk/1/2/mortgages/tracker-mortgages

buzzyzoe

I would reccomend an offset mortgage, which works by having a mortage balance and then a savings pot. Any money in the savings pot effectively comes off the mortgage balance so you don't pay interest on it. Once your savings pot is the same size as your remaining mortgage balance, you can pay the mortgage off.

This has the benefit of effectively allowing unlimited overpayments, but also meaning that you can withdraw the overpayments again if you ever need them back.

I have this mortgage with Santander and it's about as flexible as you can get. The only thing I'm not sure about is the interest rates as my rate is not too good but that's because I work in television and so don't have a permanent job as such, so was limited when applying for mortgages.