Just keep overpaying or reduce term?

murphydog999

Nearly 4 years into our mortgage and we have consistently overpaid. It currently has 13 years left, so I'm wondering if there is any benefit to changing/shortening the term - interest-wise?

The basic monthly payment doesn't go down, so presumably it is being paid off quicker anyway? Which is why we are doing it!

The bank say we have to go through affordability checks before they will answer the question - which is a bit long-winded really as if there is no benefit it makes no difference wether we can afford it or not!

Can anyone save us the process please? Many thanks

Typhoon2000

There is no benifit to reducing the term as long as you have the self disipline to continue overpaying.

Thrugelmir

murphydog999 wrote: »

The bank say we have to go through affordability checks before they will answer the question - which is a bit long-winded really as if there is no benefit it makes no difference wether we can afford it or not!

Lenders have no choice as have regulations to comply with.

Interest is calculated on the debt outstanding (normally at the end of each calendar month). Adjusting the term makes little difference. Providing you have the flexibility to make what ever payments you wish. Saving interest is through paying down the mortgage quicker. Then every month more of what you pay goes in reducing the capital balance owed. Like rolling a snowball. Over time it grows bigger and bigger.

Waldorf_Statler

I wouldn't bother with the paperwork.

Sounds like you are sufficiently disciplined to make the overpayments so why not leave it as it is? That way each month you can overpay if you want to, or not if you don't - such as around Christmas or summer holidays.

I only see the merit in a shorter term if you lack the discipline in your budget to make regular overpayments. Or if the product limits overpayments.

pinkteapot

Don't bother reducing the term. As your monthly payments aren't changing, the overpayments are already going towards reducing the term. You can use online calculators to work out how long your remaining term really is (ie when you'll finish paying it off, thanks to your overpayments). We took out our mortgage over 28 years in 2014 and we're aiming to pay it off in 14-15 years instead.

If you leave the term as-is, you may - depending on the lender - be able to ask them to recalculate your standard monthly payment (lower) in the future, to take into account the lower balance outstanding. This could come in handy if you have a change in circumstances (loss of job, illness, etc).

As above, if you're disciplined enough to keep making the overpayments, just stay as you are.

Thrugelmir

pinkteapot wrote: »

If you leave the term as-is, you may - depending on the lender - be able to ask them to recalculate your standard monthly payment (lower) in the future, to take into account the lower balance outstanding.

This will happen automatically at the next change of interest rate (applicable to the mortgage). Whether it be a product change or due to the activity of the BOE.

vw100

If you reduce the term you will be obliged to pay the higher amount every month. Currently you have the flexibility to overpay or just pay the required amount per month.