Reducing mortgage term on SO mortgage

Little_Bunny

Good morning,

I hope someone can please help me regarding reducing the amount of interest I owe but which still allows me to staircase comfortably in the future.

Basically I have a 50% shared ownership mortgage and have a few k left to overpay for this year's 10% overpayment concession allowed by my lender. I have started a higher paying contracting role so was thinking I would visit a mortgage advisor in branch and to reduce the mortgage term to the lowest it can be whilst obviously still being affordable. The only caveat to this is I have only been contracting less than 2 years (a year nearly) but have been in my field for 5+ years so this may or may not be a possibility but my mortgage advisor said this might be possible.

However, as I want to staircase to 100% , how will the lender look at the fact that I will then have a bigger monthly payment for the 50% I do own? I was aiming to staircase in January next year as by then I will have overpaid by the full 10% and am aiming to overpay 2019's 10% concession and to save up for the inevitable stamp duty. Obviously I cannot predict what my job situation will be in however I am to remain being a contractor as there is no way on a permanent salary I will pass the affordability test.


So again my query is if I reduce the term, would I be scuppering my ability to staircase because I presume I will be having 2 x 50% mortgages at the same time as opposed to one 100% mortgage (my current mortgage expires October 2019 and am happy to pay the early redemption fee if it means I can staircase quicker). Do you think the bank will let me increase my term again so the current 50% will go down making the 100% affordable or like I said will I be shooting myself in the foot?

Hope this makes sense, many thanks!


LB

dimbo61

Not sure it's a good idea to reduce the term while your a contractor if your lender will even allow it.
I would continue as you are doing and save into regular savers after you have paid the Max 10% allowed this year.
I would also wait until the end of your fix before applying to buy the other 50% of the property.
Having the cash to pay the stamp duty, mortgage fees and any other costs associated with buying the rest of the property will ensure you put yourself in the best position to get the bigger mortgage you want.
If you have a large lump sum built up then you can always ask to borrow a little less when you do apply for the extra borrowing.
If you are buying 100% of the property a broker may be able to find you a better deal

Little_Bunny

Hi Dimbo,

Thanks very much for your response and yes I understand the argument to wait until my mortgage is up in October 2019 - or at least a few months early I think I can start looking at my options. The only reason I wanted to do it in January is because I just want to stop paying the rent as quickly as possible and also I just wanted to have the security of a full mortgage rather than both rent and mortgage. I!!!8217;m sure it!!!8217;s psychological but also despite having a beautiful flat in a good location, I!!!8217;m kinda just done with it and want the flexibility of !!!8216;moving on!!!8217; whether it means selling (unlikely) or renting it out and living somewhere else, I basically just want to increase my options.

The only question I do have for you if you don!!!8217;t mind indulging is why you say not to reduce the term? Of course if I can!!!8217;t then fine but you say not to and I!!!8217;m just curious as to why. My current mortgage is a paltry £410 and whilst contracting is insecure, I feel I could pay so much more and I kind of want to make hay while the sun still shines. I!!!8217;ll keep some savings to tide me over in between jobs but otherwise I want to make big strides in paying off my mortgage rather than going at my current snails pace.

Many thanks, much appreciated.

LB

dimbo61

Changing the term in the middle of a fix will involve a full new assessment !
Your lender may say yes but your then committed to paying the new mortgage payment every single month ( work or No work )
We did just this back in 2005 with our lender.
Applied for a large mortgage over 22 years and then once agreed we asked to reduce the term to 10 years.
The nice lady at YBS asked how would we pay the extra £500 a month but we had an offset mortgage and substantial savings in the offset account!
I also had a Secure job in the NHS with professional registration !
If you can put £250/500 a month into regular savers earning 5% I would build up cash savings especially if you are considering buying another property.
PS things were different back in 2005 and we could have extended the term back to 22years.
PPS we saved £50,000 in Interest by clearing the mortgage in 10 years instead of 22 years

Little_Bunny

Hi Dimbo,

Very much appreciate the time you!!!8217;ve taken to respond. I will say I really want to do it now based on the fact you saved so much lol. I will think about it and of course they may always say no seeing as I don!!!8217;t have at least 6 months left on my contract and I haven!!!8217;t been contracting for 2 years. But I do think it!!!8217;s feasible to pay more than £450 a month ... even £200 extra is better than nothing!

Again thanks!

LB

getmore4less

If you are planing to buy the other 50% in 6 months time how much will you save by reducing the term.

Mortgage details will help work that out and how much extra you plan to pay.

Chances are it won't be much and all you are doing is borrowing the money back again in 6 month anyway

If the current deal is Oct next year then you need to watch out for a 2 part mortgage with differing change dates.

Depending on price rises buying ASAP might be better and take the hit on out of sync mortgage parts over waiting and the price going up.