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Over payments vs Reducing the term
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abz88
Posts: 312 Forumite

Hi everyone,
I have just recently started to make overpayments to my mortgage (its a 95% mortgage with 33 years to go, on a two year fixed rate (just passed year one) of 3.19%). I recently moved jobs for a decent pay increase, so I am now able to make £500 a month overpayments with the aim of getting down to the next "banding" of 90% for lower interest by September 2020 (I have savings I can use for a final push but don't want to commit them just yet).
One query I am hoping folk can help with is if I am better just making overpayments or reducing the term of the mortgage? Is there any benefit to either strategy?
Thanks in advance!
I have just recently started to make overpayments to my mortgage (its a 95% mortgage with 33 years to go, on a two year fixed rate (just passed year one) of 3.19%). I recently moved jobs for a decent pay increase, so I am now able to make £500 a month overpayments with the aim of getting down to the next "banding" of 90% for lower interest by September 2020 (I have savings I can use for a final push but don't want to commit them just yet).
One query I am hoping folk can help with is if I am better just making overpayments or reducing the term of the mortgage? Is there any benefit to either strategy?
Thanks in advance!
0
Comments
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If you have zero financial will power then reduce term. Otherwise just overpay.
Overpaying whilst keeping the original term allows greater flexibility.0 -
Overpayments, keeping the same term, means better financial stability in case of unexpected events eg job loss / baby etc. You drop back to your normal monthly payment.
Check how much you can overpay before paying fees, it's generally 10%.Mortgage started 2020, aiming to clear 31/12/2029.0 -
Thanks, I like the better flexibility of overpaying, but just wondered if there is any financial benefit to reducing the term instead? (MovingForwards, it is 10% but I won't get near that in overpayments anytime soon)0
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Thanks, I like the better flexibility of overpaying, but just wondered if there is any financial benefit to reducing the term instead? (MovingForwards, it is 10% but I won't get near that in overpayments anytime soon)
Theres no financial benefit at all with reducing the term. By overpaying youre effectively reducing the term anyway in a more flexible way0
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