Paying off early/shorten term

vernall

Hi guys

Took out first mortgage a year ago, had it over 20 years and on a 5yr fix( so 4yrs remaining of fix). I overpay each month and paid a lump sum off in December( within the 10% allowance). In fact have paid for 1/8th of the mortgage already. If I can carry on doing roughly the same each year, In 3.5 years time when the broker contacts me as the 5yr fix is coming to an end to see what I want to do, instead of having a term of 15 years left, can I say I want the remaining mortgage over 10 years or 8 years or whatever then? My plan is to of paid half off by the end of this 5yr fix. I do not want to say I only want 5 years to pay it off in case something happens and I can’t pay the amounts I have been for the first 5 years.

thanks

getmore4less

You can shorten the term subject to meeting any checks.
Which lender?

You might want to just product switch without checks.

longer term and overpay gives more options.

Some lenders the 10% is on starting loan not current.
some lenders have more generous limits, but not obvious(eg barclays)

Often hitting the 10% limit is not that big an issue for short fixes say up to 5y.
Often you can get close to the same rate for any surplus and the extra saving from going over 10% it not that big. 

if we look at an example (the numbers scale for a different size mortgage)

£100k over 20y 2%

amount	rate	payment	owing	interest
£100,000.00	2.000%	£505.88	£78,613.29	£8,966.29

payment to hit £50k in 5y

amount	rate	payment	owing	interest
£100,000.00	2.000%	£959.72	£50,000.08	£7,583.28

overpayment is ~£454pm   £5,446py

You would start hitting the 10%.
£50k over 15y with new payment over 1y

amount	rate	payment	owing	interest
£50,000.00	2.000%	£321.75	£47,112.58	£973.63

max over payment 416.67 say £738

amount	rate	payment	owing	interest
£50,000.00	2.000%	£738.00	£42,071.59	£927.59

previous amount.

amount	rate	payment	owing	interest
£50,000.00	2.000%	£959.72	£39,386.42	£903.06

saves an extra £25 less what you could have earnt in interest saving it.

vernall

Current lender is TSB

vernall

The 10% you can overpay each year is that on top of your 12 monthly payments?

so if your mortgage is £100,000, your 10% is £10,000….. for example your 12 monthly payments amount to £3000…. Can you then pay £7,000 or £10,000? 

getmore4less

https://www.tsb.co.uk/mortgages/existing-customers/making-extra-payments/