Mortage 30 year to 25 years

renfirsttimebuy

Hi...
If I was to get a mortage for 30 years and then after 2 years fixed terms I make overpayment (checked). Will I be able change the 30 years to less years (25years) when 2 years are over? 

Also will it make a difference.

strawb_shortcake

You can remortgage to fewer years as long as you meet the affordability criteria

Chumy

Or leave the number of years a it is and keep overpaying your mortgage

Thrugelmir

If you switch your mortgage from a 28 year term to 25. Then, yes it will a difference. The shorter the mortgage term the less interest you'll ultimately pay. 

MovingForwards

Depending on your lender, you can pay upto 10% of the outstanding balance in overpayments each year, therefore it will naturally bring the term down, without applying to shorten it.

Have a play with a mortgage overpayment calculator and see the difference £30pm extra makes, the bigger difference £200pm extra makes.

By leaving the term as you originally applied for, should anything happen where money gets a bit tight, you just drop back to your contractual monthly payment.

zagubov

While it costs less if you shorten the term of your mortgage, other threads have pointed out that there are some advantages to overpaying early without shortening the term, mainly to do with maintaining flexibility if circumstances change.

pinkteapot

zagubov said:

While it costs less if you shorten the term of your mortgage, other threads have pointed out that there are some advantages to overpaying early without shortening the term, mainly to do with maintaining flexibility if circumstances change.

Yep - this is what we've always done. Get the maximum term the bank will lend us then overpay as much as possible. We never intend to have the mortgage for as long as we take it out for, but it means your standard repayments are as low as possible in case of illness, job loss, etc. We see the standard repayment as being like the minimum repayment on a credit card - you don't want to only pay that much each month, but you can if need be.

It does depend on what you're like with money though. If you tend to spend money if you have it and are unlikely to have leftover at the end of the month to overpay, you'll be better off with the discipline of being committed to higher repayments. 

steampowered

Keeping a longer term with overpayments gives you flexibility if you need it.

That doesn't necessarily mean buying stuff; it could also mean flexibility to take advantage of tax efficient investments (such as stocks & shares ISAs and pensions) which offer superior long term returns and tax benefits which are may generate a better return than paying off a cheap mortgage early.