Advice - overpay or reduce term

mike_sedge

Hi

We currently approx 3 years into a 15 year term mortgage with approx £100k left to pay. We are in a healthy financial position currently so are overpaying £1k per month to try to reduce the amount and term as much as possible.

The advise I am looking for is should we continue to overpay the amount we are comfortable or should we commit, reduce the term and commit to paying the mortgage off quick over a shorter period of time.

I'd like to have in all paid off in 5 years if possible.

Any advise greatly appreciated.

Thanks
Stevo

[Deleted User]

Assuming you're paying the same, they both have the same effect.

It's just one that commits you to it and means you can't ease up if times get tough.

spadoosh

Depends on you.

The general rule is to overpay. Doing it this way gives you flexibility so should you need to tighten your belt, you can opt not to make the over payment.

For us, were not that controlled when it comes to spending money so would rather force the commitment than rely on self control which wouldve seen me buy things like a 3d printer, a laser engraver and a laptop instead of paying off my mortgage. Were in as stable jobs as you can have really and have back up savings in the event of job loss, which should see us through all but the worst situations.

mike_sedge

Deleted_User wrote: »

Assuming you're paying the same, they both have the same effect.

It's just one that commits you to it and means you can't ease up if times get tough.

Thanks for the reply - forgot to mention the important part of our situation!!!

We will reach our 10% overpayment limit this yeah so i need to change something or accept that we overpay less as our amount reduce, thus extending our term out further which we don't want.

Thanks

Begsey

We reduced the term by 5 years at our last fix, our new payment was cheaper than we were previously paying (base amount plus overpay amount).
With Nationwide, we can then overpay 10% of our original loan amount each year, not 10% of the outstanding balance.

Why not do both? Reduce the term to give you an equivalent £500 overpay, and overpay another £500. That would make the overpay within the 10% and give you the option to pay even more if you want.

A_Frayed_Knot

I reduced my term by 6 years last time as worked out with my new deal interest rate was almost halved and got a tiny pay rise, added the two together and worked out how many years that would be by paying that new amount each year, answer was reduce by 6 years.

That was all because I would have reached my o/p limit far too soon and restricted me far too much.

After that it was either a new deal restricting me and taking 2 years to pay off my mortgage or reverting to the svr, on working it all out, decided another 2 year deal was not for me, as hoped to finish much sooner.

Because I was paying the SVR interest it actually spurred me on - double quick - as no limit to how much you overpaid and managed to finish my mortgage in 14 months.