pls help me decide !

missindecisive

Hello all, please help me decide what to do !

We have received a letter from our mortgage company basically inviting us to extend the term of our mortgage form the existing 11 years to 15 years. If we do this my DH will be 65 when we finally pay it off. Currently owe £62k 1.50% with first direct.

Ive had a look at the calculators and this will bring our monthly payment down by approx £200 a month (we could really do with this money right now) and will cost us an extra £2.5k in the long run. Dh is adamant we should extend it, I'm not so sure, although we are paying all our bills etc on DH salary, our family is still relatively young and my earnings are limited as I work 2 small part time jobs to fit in with the family.

Mother says to just do it as we need the money now while the youngest kids are still young.I expect we will only stay in our home for the next 10 years or so then probably down size as the older kids grow up. I'm not to sure about still having a mortgage when we are 60 ish years old. Perhaps I'm being cautious? What do other people do these days? I always had it in my mind that I would be mortgage free by the age of around 55, certainly before 60. Dh says that the debt will be next to nothing by then, I don't know what to do for the best !

f2f

What do you need the money for now? Do you have emergency savings? You could still potentially overpay or reduce the term in future if plans/income changes. Or increase the term but overpay to build in some flexibility?

frazell

There's two arguments to this in my opinion;


Keep the mortgage as it is and try to keep the payments up, after all, you have been up to now, unless something significant has changed? Save 2.5k and retain the mortgage term.


Extend the term and save £200pcm. I suppose looking pragmatically you could always reduce the term at a later date by overpaying the mortgage as and when you have spare cash. Depending on how much you might overpay, this could put you back to where you started term wise, or even reduce it!


Your DH is correct though in that in say 10 years time with inflation and house price trending upwards, the real cost of your remaining mortgage (about 22k after 10 years) will probably be half of the UK average wage packet. Therefore you could just work hard for a couple of years in 2026 and do the mortgage in completely.


If it was me in your position and I REALLY needed the money then I would extend to 15 years (providing it was free to do so) but then set up an overpayment standing order for say £150pcm and then try to budget around that. Good months you can increase to £200 or £250 and bad months you can reduce to £50 or £100.


I think this gives a flexible approach but allows you to budget. The more that you overpay the greater the impact on your term, so any spare change or cashback or even a tenner down the back of the sofa will help get you to mortgage free status at 55.


Hope that helps, but the question I suppose is if you REALLY need the money.