Advice on remortgaging

cool_dude_2000

I have always been thankful for the huge amount of advice available on these forums, and I would be grateful for one specific to my circumstances.

I am on a five year fix mortgage which expires in May 2018. At the point of taking out the mortgage, my LTV was about 85%, but since then, the sudden increase in house value has meant I am probably closer to 50% LTV.

Judging from online quotes, it appears the interest rate doesnt vary much, whether I get a 10 year mortgage or 30 year term.

As there doesnt appear to be any advantage to getting a shorter term length, my question is whether it would be worthwhile getting a longer term mortgage, so as to ensure I have lower minimum monthly payments? This would provide some flexibility if I need additional cashflow in certain months, by making the lower minimum monthly payments, whilst making over payments the remainder of the time (obviously within the penalty free limits).

Can anyone see any adverse implications to this?

Edi81

You pay more interest if you don’t overpay - will you really overpay or be tempted to spend the money?
Depending on your age you may not get a 35 year mortgage.

xyz123

As mentioned longer the term, more interest paid. Some mortgage deals have restrictions on overpayment (mostly fixed deals but it is possible to get a fixed deal with no overpayment restrictions). This limit is usually 10% of outstanding balance so on say £100,000 mortgage you can over pay £10,000 without penalty. So depending in personal situation, (job security, income, amount of. Mortgagees) you can. Ame a decision that works for you.

The_Real_Cheddar_Bob

Whilst the mathematicians will point out you will pay more interest over a longer term, I am an advocate for the lowest monthly payments possible with mortgages. The flexibility offered by allowing a greater increase in cash flow far out weights the bragging rights of how much of your mortgage you have paid off.

If you are then in the situation where you can put chunks aside, I would put it somewhere safe, then once a year make the over payment so that it reduces the capital.

Remember, your money is far better in your bank and your control. Once the mortgage company has it, it takes time and effort to get it back.

There are many folk on here that will tell you to over pay on a monthly basis. The benefits are huge, you pay off your mortgage quicker..... There will also be the same folk who have done this who find themselves looking for a loan.

best of luck

The_Real_Cheddar_Bob

Edi81 wrote: »

You pay more interest if you don’t overpay - will you really overpay or be tempted to spend the money?
Depending on your age you may not get a 35 year mortgage.

Really valid point with regards to overpay vs spending. The unfortunate situation about uncontrolled spending is it can happen with or without mortgage over payments, the latter just offers more money to overspend.

It takes a lot for someone to make spending habit changes.

cool_dude_2000

Thanks very much for the replies.

I have a monthly repayment budgeted in mind, which would result in paying off the mortgage earlier than it's current term. So I would be paying this amount regardless of the term, but it's the flexibility of having temporary lower payments which is appealing. Rjwr has hit the nail on the head here.

enthusiasticsaver

Do you need lower payments? Is your monthly payment affordable at the moment? Most people tend to spend up to their income. Hence if you pay a lower mortgage payment monthly and then fritter the difference on not very much you are delaying the mortgage being paid off and making it more expensive in the long run.

There will be all sorts of reasons over the years when you may need flexibility, sickness, redundancy, maternity leaves and so on. If you lower the payment when you don't need to I actually think you are giving yourself less flexibility as you may not have the option of payment holidays, term extensions later on when you may need them if you have not repaid much of it due to lower payments now.

How old are you and when is it due to be repaid now? Do you have children and will you need to help them with uni costs? We planned to pay our mortgage off just before our second daughter started uni and then once they both had finished we concentrated on building up savings for retirement to complement pensions. That worked well.

cool_dude_2000

I'm 38 yrs old and have about 25 years left on current mortgage, on which I have been making slight overpayments. With the amount I can afford to pay each month, I figure I can settle it in 15 years. However rather than get a 15 year mortgage with commitments to that amount, I can continue to pay my budgeted amount voluntarily but with the option of saving approx £500 a month if I need the cash for any reason. Obviously I would need to be disciplined to ensure I make the overpayments.

enthusiasticsaver

Are you limited to 10% overpayments each year? I would not go to 30 years as that will take you to age 68. Why not just leave it as it is at 25 years? If you are overpaying anyway you are giving yourself some leeway but most people want to pay a mortgage off before retirement so it depends on when you see yourself retiring. If you can earn more in savings than you are paying on your mortgage it makes sense to keep to the lower repayment.

juniordoc

Could you compromise and go for a 20-22 year term? It could be an advantage to have your mortgage paid off by age 60 as you can't guarantee you'll be in good enough health at 68 or even 65 to work full time.

Thrugelmir

cool_dude_2000 wrote: »

I'm 38 yrs old and have about 25 years left on current mortgage, on which I have been making slight overpayments. With the amount I can afford to pay each month, I figure I can settle it in 15 years.

I assume that is based on current levels of interest rates. With interest rates incrementally heading only one way. Personally I would maintain the status quo. If at all possible. Then you are in essence future proofing against any downside risk.