Switching Mortgage - Reduce term or overpay

smilin

Hi,

I'm hoping one of the gurus here will be able to help me.

I took out a mortgage nearly five years ago. I overpay by £65 a month.

My 5 year fixed term is coming to an end on my mortgage, so its now time to switch again. I'm finding that I can reduce the term to 16 years (from 21) and be paying the same amount as I am at the minute.

My question is, do I reduce the term, or keep it as it is, and overpay the rest (about £120 a month + my usual overpay amount of £65)

If anyone can give me any pointers, it would be great

James

exiled_red

I'm no expert but I would look at the deals that are available for both situations and assuming that you aren't too stretched making the over payments take the one that gives you the best deal.

If the overpayments are stretching what you can afford or your circumstances might change in the term of the mortgage remember that the longer term gives you more flexibility (as you can stop making the overpayments if you need money for something else) obviously make sure that that any early repayment fees kick in at a point which is higher than what you expect to pay over a year's worth of regular overpayments.

Thrugelmir

smilin wrote: »

I'm finding that I can reduce the term to 16 years (from 21) and be paying the same amount as I am at the minute.

How would you cope with a rise in interest rates.

Gilly91

i'd personally stick with the longer term and carry on the over payments. this way you'll know exactly what you'll be paying and also have the added flexibility that if something did go awry, you could drop your overpayments to use for something else.

d70cw6

Thrugelmir wrote: »

How would you cope with a rise in interest rates.

if he gets a 5 year fix, probably quite well :P

muhandis

Echoing the others, in your place I would always pick overpaying over reducing the term because it leaves me the flexibility to stop overpaying if I want/need to and as Martin says (and explains how 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

smilin wrote: »

Hi,

I'm hoping one of the gurus here will be able to help me.

I took out a mortgage nearly five years ago. I overpay by £65 a month.

My 5 year fixed term is coming to an end on my mortgage, so its now time to switch again. I'm finding that I can reduce the term to 16 years (from 21) and be paying the same amount as I am at the minute.

My question is, do I reduce the term, or keep it as it is, and overpay the rest (about £120 a month + my usual overpay amount of £65)

If anyone can give me any pointers, it would be great

James

smilin

I ended up reducing the term to 16 years and fixing for 5 years, and am still overpaying. I did make a £1000 over payment, which was the cashback from the mortgage and the difference between the mortgage amounts, which reduced my monthly payment, but I just added the reduction to the overpay amount. I'm nowhere near the maximum amount I can overpay so know I can increase when I'm able to, and reduce it when I cant.

Thank you everyone for your advice, and sorry for taking so long to update this post.

James