Clarity needed

sazandy25

Hi, we are currently in a fixed deal until 31st August 2019, the rate is 3.75% we will have 15 years left as of August. Our mortgage total debt is £82,000 with a house value of £160000, our current payments are £567, but overpay by £50 a month, so £617.

We like the idea of a 10 year fix, so got in contact with a broker, who found TSB fixed 2.39% NO FEE. According to their sums, we would be able to afford to reduce the term to 13 years & the payment would be very similar (£619) to what we pay now.

However today TSB has come back to say that they feel on their affordability checks we would need to increase the term up to 16 years, the broker has said, this does happen sometimes. But as we do now, we would be able to overpay, to increase to the figure to £615. We don't currently know what the payments will as yet.

I know bank affordability checks are needed but if we are paying an amount & have been for 3 years or more, how can they say we can't afford it?? Also are we paying more overall by the years being increased, even though we will overpay?

Thanks for any advice

muhandis

You're worrying about a non problem. Whether you reduce your term or overpay, the interest saved is the same. Martin explains it very clearly here https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

In your place I would go ahead with the 16 year term and just overpay so I'm making the same payments as I would have on a smaller term. You'll end up saving the same amount of interest. Of course, I'm assuming your TSB product has a fee-free overpayment allowance.

sazandy25 wrote: »

Hi, we are currently in a fixed deal until 31st August 2019, the rate is 3.75% we will have 15 years left as of August. Our mortgage total debt is £82,000 with a house value of £160000, our current payments are £567, but overpay by £50 a month, so £617.

We like the idea of a 10 year fix, so got in contact with a broker, who found TSB fixed 2.39% NO FEE. According to their sums, we would be able to afford to reduce the term to 13 years & the payment would be very similar (£619) to what we pay now.

However today TSB has come back to say that they feel on their affordability checks we would need to increase the term up to 16 years, the broker has said, this does happen sometimes. But as we do now, we would be able to overpay, to increase to the figure to £615. We don't currently know what the payments will as yet.

I know bank affordability checks are needed but if we are paying an amount & have been for 3 years or more, how can they say we can't afford it?? Also are we paying more overall by the years being increased, even though we will overpay?

Thanks for any advice

kingstreet

sazandy25 wrote: »

I know bank affordability checks are needed but if we are paying an amount & have been for 3 years or more, how can they say we can't afford it??

Lender affordability is based on higher future rates, not current rates so they are trying to "future-proof" your affordability.

Take the longer term and overpay.

sazandy25

Yes, 10% over payment.

I knew there was an article on here, but couldn't find it.

Thanks

sazandy25

Thanks kingstreet