Length of Mortgage 7 June 2020 at 10:43AM in Mortgage-free wannabe 2 replies 171 views

kenzie123

Hello
Our current 3 year fixed term ends in September so we are looking at new rates. Our old rate was 1.94%.
The mortgage term was 30 year, so we now have 27 years remaining -
If we get a new deal, what is more cost effective over time - is it best to keep a 27 year term, and pay overpayments, or switch to a lower term of 20 years, and have the monthly payments be higher.
I imagine it depends on the interest rate. At the moment we can make overpayments so think keeping 27 years is best, so we can vary our OPs and have a lower monthly outgoing. Do you agree, or does anyone think a 20 year term is best so the mortgage is over faster..?

Thank you 

longway2go

If you are paying the same amount I do not believe it will make any difference. If you shorten the term you will contractually be committed to more a month so not as flexible should you wish to reduce payments. The other point to keep in mind is the flexibility of the product and how much can you actually OP as this could restrict you. 

Rolandtheroadie

 After around 6 years of overpaying the same amount every month, we took 5 years off our 13 year remaining mortgage a couple of years ago, paying a bit less overall. 
Change in circumstances meant it was now possibly going to leave us a little bit stretched. We were 2 years into a 3 year fix.
Contacted our lender (Nationwide) and applied to extend the mortgage term. They done this with no problems and no fees. 
At the time of reducing the term, my thought was I'm more likely to make the payment due rather than deciding whether to over pay or not.