Reduce term or over pay

adywillie

Hi, I have read the article on over paying a mortgage rather than reducing the term, although I have recently increased the value of my house and so my ltv has reduced. When I look at the mortgage deals at the moment if I was to continue at my normal term the repayments would reduce by £130 / month, or I can reduce my new term from 24 to 21 years and keep the monthly payment the same. So my question is would I be better off reducing the term or sticking to normal term and overpaying the £130 ( or as much as allowed without penalty)?

foxy-stoat

Keep the payments up and reduce the term I would say.

getmore4less

longer term and overpay till you hit free overpayment limits.

Zero_Sum

Keep term & overpay keeps a greater level of flexibility if needed

adamcarvell

we are overpaying to reduce the term we increased our direct debit amount should we need to reduce it back to what it was we can but our aim is to finish the mortgage sooner. we kept the term the same giving us a bit of flexibilty.

nicholbb

Reducing the term and paying an extra £130 each month and keeping the term and overpaying £130 each month has the same financial benefit.


If you think you'll be able to pay above your limit each year (often 10% a year). You are not always going to make the effort to do it or likely to spend on something else, then reduce the term so you can pay off more.


If you are unsure if you'll be able to afford the £130 each and every month. You may want a payment break. You think you'll get a better rate in savings than the mortgage before the end of your fix, then overpayment makes more sense.


I personally overpay as mortgage fix was so low I may do better in savings after a few rate rises. Also I like the flexibility.

Thrugelmir

As and when interest rates rise so will your fixed monthly outgoings. Never wise to over commit. Flexibility is usefull.

adywillie

Thanks everyone for your replies. Flexibility seems to be the common theme so I will bare that in mind. I was thinking that it also requires discipline so personally I am better offer biting the bullet and reducing the term. I will weigh everything up and make my decision. It will probably only be for 2 years so if it’s too much I can always shuffle things back around to make myself more comfortable. Thanks again :T

jackomdj

adywillie wrote: »

. I was thinking that it also requires discipline :T

If you set it up so the overpayments come out with your mortgage you will forget you are doing it and not count that as accessible money.

getmore4less

adywillie wrote: »

Thanks everyone for your replies. Flexibility seems to be the common theme so I will bare that in mind. I was thinking that it also requires discipline so personally I am better offer biting the bullet and reducing the term. I will weigh everything up and make my decision. It will probably only be for 2 years so if it’s too much I can always shuffle things back around to make myself more comfortable. Thanks again :T

That's a catch 22, you need to make life easier with a longer term and they look at your finances and say no you can't afford it can't change.

Longer term and overpay that way YOU STAY IN CONTROL of your payment down to the contractual payment.

Why hand that choice over to your lender?

Trundley27

I am mortgaging at the moment, I have £110,000 currently left which equates to £640 p/m I am reducing my term to 17 years and just keeping the same monthly payment. I will be going into a 5 year fix @ 2.19% so my plan is (if all well) is to see out the 5 year fix (13 year term left) then remortgage not for 13 years but ca 8 years. Hopefully all being well mortgage free in 12 to 13 years time at age 42. We are in what your would call a 'life house' as well with no intention to move, unless anything drastically changed of cause!