Over payments vs Reducing the term

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!

Replies

  • Zero_SumZero_Sum Forumite
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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.
  • MovingForwardsMovingForwards Forumite
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    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%.
  • abz88abz88 Forumite
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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)
  • edited 5 October 2019 at 1:52PM
    Zero_SumZero_Sum Forumite
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    edited 5 October 2019 at 1:52PM
    abz88 wrote: »
    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 way
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