Mortgage - Re Mortgage

Bliss118

Hello

Im looking for a bit of advice regarding a re mortgage first here is the situation,

Remortgage available in 5 Months possible to secure a deal in 2 with the current lender "nationwide" House was brought 3 years ago for 110k with 10% deposit currently estimated to be worth 131k by Zoopla not including the money spent on it. As we were first time buyers our rate is around 4%

Now obviously we can cut this to below 2% and save upto £100-£150 a month and continue with a 22 year deal down from the original 25 but if i continue to pay the same amount £540 i can reduce the mortgage down to 17 years knocking off 5 years from the mortgage and saving something like 30k Is this correct or am i looking at it wrong?

Are there any pros and cons to this approach?

Thanks for reading.

Thrugelmir

Interest rates are highly unlikely to remain at current levels for the remaining term of your mortgage. Better of having the flexibility to make overpayments to the mortgage. Than over commit to a higher monthly outgoing that you may struggle with in the future.

muhandis

Personally, when getting a mortgage/remortgage I would always go for the longest term possible with the lowest monthly payments. I would then use any surplus money I have to overpay the mortgage while keeping the term the same. This will bring down the monthly payments and interest over the lifetime of the mortgage without committing myself to a higher payment.

Most lenders allow a 10% (either of outstanding loan at start of year or initial loan amount) annual overpayment without any penalty.

As Martin says in the link below "Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to."

http://www.moneysavingexpert.com/news/mortgages/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers

Bliss118 wrote: »

Hello

Im looking for a bit of advice regarding a re mortgage first here is the situation,

Remortgage available in 5 Months possible to secure a deal in 2 with the current lender "nationwide" House was brought 3 years ago for 110k with 10% deposit currently estimated to be worth 131k by Zoopla not including the money spent on it. As we were first time buyers our rate is around 4%

Now obviously we can cut this to below 2% and save upto £100-£150 a month and continue with a 22 year deal down from the original 25 but if i continue to pay the same amount £540 i can reduce the mortgage down to 17 years knocking off 5 years from the mortgage and saving something like 30k Is this correct or am i looking at it wrong?

Are there any pros and cons to this approach?

Thanks for reading.