What are implications of reducing term on mortgage

harshitguptaiitr

I have made some overpayments recently (after investing my risk appetite worth under S&S ISAs). I am also a 6-7 months away from end of my fixed term period.

Remortgage will give me a lower fixed term interest rate than what I am paying currently..

I am thinking whether to reduce mortgage term so that new fixed deal would mean similar monthly payment requirement as it is now (which will help pay mortgage quicker)...

I am not entirely sure of the implications though...

Should I reduce my term now or reduce it at the time of remortgage?

What are pros and cons of reducing at time of remortgage against not reducing at all?

miss_undastood

Why bother reducing it now? You’re committing yourself to larger payments now if you do it now?

If reducing the term you’d have to be mindful of what would happen if rates go up (even if it’s when you get to the SVR if it’s fixed initially) as you could end up committed to higher future monthly payments if for whatever reason there isn’t an abundance of mortgages at the end of your fix.

It’s all a balancing game and weighing up the risks and what is an acceptable level of risk to you

pennystretcher

When you remortgage, check the overpayment facility - just by overpaying you are effectively lowering your monthly payment, but still have the flexibility to pay more. When I last remortgaged, I shortened the term by couple of years as I knew that I could afford both, increased monthly payment and OPs.


Do the calculation and see if you could still pay your mortgage with shorter term if the rates went up to, say, 10% when you move to SVR after deal ends..that's what I did just to be on the safe side.


It all really depends on how much disposable income you have, how secure your job is etc. For me paying mortgage off early was the best thing I have done..


Also if you are still on a deal, changing the term will typically have a fee applied to it, they may possibly waive this if you do it on point of remortgage (if you remortgage with same bank)..