Quick & Basic Advice Please

strokebow

Hello all,

Need some mortgage assistance.

I'm buying a house had offer accepted, getting a mortgage sorted. In approximately 2 years it is likely I would have the cash to buy the house outright and become mortgage free.

When it comes to paying off the mortgage in its entirety after 2 years, will the price I pay have any bearing on the length of the mortgage. So what I want is to have low monthly payments in the meantime. So take out a mortgage on a 30 years term. BUT would this impact on the bottomline I had to pay in my lump sum versus say an 18 year temr.

Over the length of your mortgage you pay less in total if you borrow over a shorter period. That is clear. But if you buy out the mortgage do you end up paying more???

kingstreet

You will have paid off less after two years of a thirty year mortgage than you would after two years of an eighteen year term.

The redemption figure after two years will simply be what you owe, nothing more nothing less.

The monthly payments are lower of course.

strokebow

Thanks. I think I understand now. Let me make up an arbritary scenario.

I loan 100,000 to buy the house over 30 years.
Over the mortgage lifetime I would pay back £250,000 (if I kept up with monthly recommended payments)

After 2 years do I need to pay back 250,000 minus 2 years payments??? Or 100,000 minus 2 years payments

kingstreet

No, it's what you owe.

What you borrowed less what you've paid off.

You don't take interest over the whole term into account it doesn't work like an unsecured loan.

strokebow

kingstreet wrote: »

No, it's what you owe.

What you borrowed less what you've paid off.

You don't take interest over the whole term into account it doesn't work like an unsecured loan.

Thanks thats really helpful! So the term - in my case - isn't a big deal and having a longer term wont make too much of a difference.

For my case, would it be better to go for repayment or interest only?

kingstreet

I've no way of knowing your case.

Interest-only without a repayment vehicle is quite difficult to come-by today and is subject to a lot of strings, such as LTV, equity, income etc.

The balance will be the same at any point in the mortgage term.

As stated, the two differences in different lengths of mortgage term are the monthly payments and the amount remaining outstanding at any point in future when considering a capital & interest repayment mortgage.

minimike2

Your bigger issue is finding a lender who will be willing to lend to you *knowing* you plan to redeem in full in two years time.

tlc678910

There are usually early repayment charges if you repay the mortgage during the promotional period. So if you want to repay the mortgage in 2 years go for a two year fix or tracker (it can still have a 25 /30 year term) and not a 5 or ten year fix or tracker.

Make sure there are either no early repayment charges at all or none after two years.

Tlc

amnblog

If you tell the lender you only need the mortgage for two years they may refuse to lend at all (on the basis that they 'don't do short term lending').


For most cost effective lending take the mortgage for the shortest term you can today whilst affording monthly payments.

Take a product that allows you to redeem without penalty when you cash arrives.