Getting a Mortgage and Overpayments

DaisyChain83

Hi I am just about to take out a mortgage for the first time. It will only be a small mortgage for a half share of a house. One thing I am struggling to work out is whether it is better to take a slightly shorter term with higher monthly payments, or a slightly longer term with lower monthly payments but make overpayments when I can.
What would be the difference in me taking the longer mortgage initially but overpaying to the same amount of the shorter mortgage hence reducing the term in the long run anyway (provided there is no fee for overpayments)? Although I'm confident I could make the higher payments, taking the slightly lower payments would offer me more flexibility if I need it, but are there any downsides to this? I hope this makes sense, any advice greatly appreciated

K_S

@daisychain83 From an interest saving point of view, there's no difference between taking a shorter term with a higher mortgage payment VS taking a long term with a lower mortgage payment and then voluntarily overpaying (without triggering any overpayment penalties).

Martin's article here explains it well
https://blog.moneysavingexpert.com/2014/10/dont-shorten-your-mortgage-term-if-you-can-overpay/

As you correctly point out, with a longer term you retain the flexibility to stop making the overpayments if your circumstances change so if that is important to you then you could go down that route.

DaisyChain83 said:

Hi I am just about to take out a mortgage for the first time. It will only be a small mortgage for a half share of a house. One thing I am struggling to work out is whether it is better to take a slightly shorter term with higher monthly payments, or a slightly longer term with lower monthly payments but make overpayments when I can.
What would be the difference in me taking the longer mortgage initially but overpaying to the same amount of the shorter mortgage hence reducing the term in the long run anyway (provided there is no fee for overpayments)? Although I'm confident I could make the higher payments, taking the slightly lower payments would offer me more flexibility if I need it, but are there any downsides to this? I hope this makes sense, any advice greatly appreciated

DaisyChain83

Thankyou @K_S that is really helpful

CountingPenniesClaire

I went for the longer term/lower payments option and it really helped smooth out the peaks and troughs of life. When we could overpay we did and when we struggled we weren’t too highly leveraged not to afford monthly payments. The key thing to remember if when you can overpay, do it. Good luck! 

Sncjw

We went for longer term and option to over pay. Check what your limit is for each year for over payments. Ours with nationwide is 10 percent of the initial mortgage amount taken out. 

It gives you the flexibility and if you can't afford to over pay straight away due to costs of getting settled then it will help with that. It might take longer to get the things you need Id.you went for the higher payment.

It took us three years before we started overpayments due to stuff needed done in the housr and other priorities. Now wwe are in a space where we can overpay.