Longer Years Higher Payments

axel132132

Hi,

I notice when doing mortgage caluclations that if you choose less years the monthly payment goes up.

Is it better to set a mortgage up for example at 25 years. Pay higher amount.

OR

Is it better to set the mortgage up for 30 years, and then overpay the mortgage to lower the years. Then if anything ever happens can lower the mortgage back down to the lower rate if that makes sense.

To me it seems more sense getting the mortgage over 30 years which for me works out at 700 quid and then overpaying to 1000 a month. Knocking a fair few years of. Then if for example I get a new change change job etc I can lower it back down to 700 a month and its more affordable.

But part of me thinks theres more to it than this because surely everyone would then just take a mortage over 30 years and overpay to the amount of years they wish to do just incase, and you would also think all mortgage companies would make this a set thing so people can afford better.

Do you pay more in the long run by doing 30 years and overpaying, or is it the same?

Thanks

ACG

It depends on the person. Shorter term you are committed to making those payments. Longer term gives you more flexibility, but it is easy to get side tracked.

I want a new TV, meh, lets just lower the mortgage for 1 or 2 months to pay for it. I want a holiday... Its Christmas....The boiler broker....the car needs a new.... and before you know it you are 6 months down the line and have not overpaid once.

somethingcorporate

If you overpay as if you were on the shorter term it would make absolutely no difference. As per ACGs excellent advice if you do go for the longer term it is so easy to not keep the overpayment discipline.

AnotherJoe

To answer your last question it would be the same apart possibly from any extra fees for paying off early though the odds of you being on the same mortage in 25 years would be low.

As to your first Q, “if its sucha good idea why doesn’t everyone do this” two answers which possibly amount to the same thing, are (1) what ACG said, and (2) there are plenty of financially obvious things people should do which people don’t do for various reasons including ignorance*, stupidity, short termism.

* a good example of that is the MFW forum in here full of people bending over backwards to pay off low rate mortgages as fast as possible whilst ignoring the huge tax savings and growth possibilities from pensions.

axel132132

ACG wrote: »

It depends on the person. Shorter term you are committed to making those payments. Longer term gives you more flexibility, but it is easy to get side tracked.

I want a new TV, meh, lets just lower the mortgage for 1 or 2 months to pay for it. I want a holiday... Its Christmas....The boiler broker....the car needs a new.... and before you know it you are 6 months down the line and have not overpaid once.

Very good thanks alot, i will be diciplined with it so makes sense for me to go 30 year and overpay - because i may be looking at same company changing role which is a pay cut for a pay rise.

Thanks again for rapid replys :-D