Extending term to get a deal but overpaying more?

martyp

Hi all,

I'm hoping someone can help me with this one.

My current 2.29% deal ends in a couple of months and a broker suggested a nice 2.04% deal that included a nice cashback incentive.
Then the application failed as for some reason my low but full time salary only meant I was eligible for about £3k despite very low outgoings, no loans, credit cards etc and great credit history.
I thought this was odd so called the lender direct and they said they could offer me an amount just £2k shy of my mortgage BUT if the term was extended from the current 18 years to 21 they could cover the amount.

I currently pay £227 with a £50 monthly overpayment, it looks like on the new rate I'd be paying £194 so could then maybe over pay by up to £100 a month.

Looking at the overpayment calculator it doesn't seem to be a big difference but does extending the term by 3 years to get a good deal make sense?

I was thinking with the bigger overpayments it would still put me in a good position to shorten the term later on?

Having trouble working out all the maths on this...

getmore4less

Payment decides the cost, term just decides the min payment.

If that's the deal you want take the longer term.

Tom99

If you pay c£275pm it will make no financial difference if the term is 20/30 or 40 yrs.

martyp

Excellent thanks

Thrugelmir

How do you intend covering the costs of remortgaging to a new lender.

What new product options do you have from your current lender.

The longer the mortgage term the more interest you'll pay. If you can afford to overpay by more now then do. Compounding is your friend when it comes to saving on interest charges. .

martyp

Thrugelmir wrote: »

How do you intend covering the costs of remortgaging to a new lender.

What new product options do you have from your current lender.

The longer the mortgage term the more interest you'll pay. If you can afford to overpay by more now then do. Compounding is your friend when it comes to saving on interest charges. .

There should be £500 cashback and the broker has £299 conveyancing package so hopefully the remaining £201 will cover Chaps etc. My existing lender has no exit fees or anything either if I leave after my current fix has ended.
Also there are no other fees for the new mortgage.

pinknsparkly

Do make sure that you check your new lender won't charge you to make overpayments. Usually you can overpay 10% per year, but make sure that's the case for this lender! If they don't charge you to make overpayments, then yes - you can "convert" a 21 year mortgage into an 18 year mortgage simply by making overpayments. Even a fractionally smaller interest rate means that more of your payment (and over payment) is going towards reducing the capital rather than paying off interest.

martyp

I can overpay up to 10% annually apparently.

I've spoken to the broker and he suggested what the lender said was rubbish as when he applied it did a credit check and it came out about £8k short.
My credit rating is really good which he insisted wasn't a problem as they would still lend to me but not as much as I need.
I suggested the increase to a 21 year term and he kept telling me it was bad advice.
The suggestion now is I take a new 2 year fix with my current lender at 2.94% which is an extra £16 a month from the amount I currently pay and nearly £50 more than if I got a 21 year term with the new lender.
I really wanted to save money with a new fix not get a new one at a higher rate, my mortgage is just under £40k.
Not sure what to do now as I was keen on the 21 year term but if they've only been offered an amount 8k less than needed with a credit check then is that the be all and end all?

Thrugelmir

martyp wrote: »

The suggestion now is I take a new 2 year fix with my current lender at 2.94% which is an extra £16 a month from the amount I currently pay and nearly £50 more than if I got a 21 year term with the new lender.

What you need to compare is how much you will owe in 2 years time. Not the monthly outgoing in £'s. By extending the term your monthly payments will be lower. However your interest charges will be higher.

Thrugelmir

martyp wrote: »

The suggestion now is I take a new 2 year fix with my current lender at 2.94% which is an extra £16 a month from the amount I currently pay and nearly £50 more than if I got a 21 year term with the new lender.

What you need to compare is how much you will owe in 2 years time. Not the monthly outgoing in £'s. By extending the term your monthly payments will be lower. However your interest charges will be higher.

martyp

I'm now unsure what to do as the mortgage broker is saying I should stay with my current lender on 2.94% for 2 years. I could have just done that myself, it'll cost me an extra £16 a month as I'm on 2.29% now.
I was looking forward to paying less each month as the broker is also pushing a life insurance policy that'll cost me about an extra £6 a month.
I don't know whether to pursue the deal I wanted eith the major high street lender as it would be almost £50 a month cheaper than staying with my current provider.
I fear the broker is just choosing the easiest option for commission and I'll be over £20 a month more out of pocket.
It's silly as their credit check is saying the most I can get from the new lender is £31k whereas the mortgage is only £39k. My LTV is under 60% and it's a shared ownership.
It seems Trussle don't do shared ownership, is Hey Habito a possibility?
What if I go to the lender direct and discuss it with them?
I hate my financial situation being misunderstood as currently my wage is low (£15.5k) but expect to get more in the next month or so with minimum wage at least. I have money in savings as well but wouldn't want to put that towards the mortgage as it's in current accounts getting 5% and 3%
I have no credit cards, loans, finance agreements at all and have never missed any payments and have overpaid my mortgage each month for the last couple of years so to be judged by a new lender suggesting I was unable to afford a monthly payment nearly £100 less than what I'm paying now is a bit frustrating.
If my broker doesn't charge any fees then can I safely go elsewhere or go direct?