Remortgaging and term length advice please?

ginashamz

Hi,

I am in the process of remortgaging my property. The balance that remains, is £140,000 and I have requested for an off-set mortgage in the amount of £185,000 - therefore having the extra £45,000 when I choose for it to be released.

I had initially requested for a 19 year term to pay off the balance in capital plus interest repayments, however, the mortgage broker recommended that I go for a 35 year term, as I would be eligible for a bigger loan and that I can still make additional payments to reduce it the equivalent 19 year term. Does this sound correct?

Obviously, I would like to pay as little interest as possible, hence why I wanted the reduced term of 19 years.My broker said if I overpay by £365 a month on top of the monthly repayment, it will equate to a 19 year term and overall, I won't be paying any extra? Does this sound right?

Thrugelmir

For what purpose are the additional funds going to be used for?

ginashamz

Thrugelmir wrote: »

For what purpose are the additional funds going to be used for?

The deposit for a second a second property

ginashamz

So is the broker right in what he says?

SG27

ginashamz wrote: »

So is the broker right in what he says?

Yes I did the same. Pushed the term back to enable more borrowing.

But be careful with your overpayments. If your mortgage only allows 10% overpayments per year you could find yourself going over and incurring early repayment charges. Especially in later years of your mortgage when the outstanding amount is lower.

kingstreet

Is £365 the difference between the contractual payment for a 19 year term and the contractual payment for a 35 year term?

If it is, the broker is telling the truth.

ginashamz

kingstreet wrote: »

Is £365 the difference between the contractual payment for a 19 year term and the contractual payment for a 35 year term?

If it is, the broker is telling the truth.

Yes the £365 is the difference between the monthly payment for 19 years and the 35 years term. Therefore if I opt for the 35 year term, and make the £365 monthly over-payment, in effect, the total cost would be the same as a 19 year term with no over payment??

kingstreet

Yes. The monthly payment determines how long it will take to repay the mortgage, so if you pay the amount you should on a 19 year term on a 35 year term, the mortgage will be repaid after 19 years.

sammyjammy

ginashamz wrote: »

Yes the £365 is the difference between the monthly payment for 19 years and the 35 years term. Therefore if I opt for the 35 year term, and make the £365 monthly over-payment, in effect, the total cost would be the same as a 19 year term with no over payment??

Correct and you retain the flexibility to reduce that overpayment if you should need to.