Are there any benefits of shorter mortgage term?

dimbo61

The good old Tax man is now taking a 20/40% cut out of the Interest you earn from savings once you earn more than £1,000/£500.
This website is all about Money Saving and there is a separate board all about Mortgage Free Wannabe!
Why because a mortgage is for most people the bigger debt they ever have.
Clearing the mortgage gives you more options later in life.
The first thing I would always do is secure the Roof over my head.
Pensions are great if your employer is paying in large sums as well.
Stock and Share, Bonds and ISA,s are also great ways to save.
Unfortunately  we see many posts on here about people nearing  retirement  with large Interest only  mortgages and  NO means to pay them off.

CSI_Yorkshire

dimbo61 said:

The good old Tax man is now taking a 20/40% cut out of the Interest you earn from savings once you earn more than £1,000/£500.
This website is all about Money Saving and there is a separate board all about Mortgage Free Wannabe!
Why because a mortgage is for most people the bigger debt they ever have.
Clearing the mortgage gives you more options later in life.
The first thing I would always do is secure the Roof over my head.
Pensions are great if your employer is paying in large sums as well.
Stock and Share, Bonds and ISA,s are also great ways to save.
Unfortunately  we see many posts on here about people nearing  retirement  with large Interest only  mortgages and  NO means to pay them off.

I'd rather have money in an 8% interest paying account than paying off my 1.4% mortgage.  And that's accounting for the tax implications.

To do otherwise would not be money saving.

Having a decent amount of savings gives you more options at every point in life.

Your opinion is sentiment and not based on mathematics.  Money saving is a mathematical decision.

Sg28

CSI_Yorkshire said:

dimbo61 said:

The good old Tax man is now taking a 20/40% cut out of the Interest you earn from savings once you earn more than £1,000/£500.
This website is all about Money Saving and there is a separate board all about Mortgage Free Wannabe!
Why because a mortgage is for most people the bigger debt they ever have.
Clearing the mortgage gives you more options later in life.
The first thing I would always do is secure the Roof over my head.
Pensions are great if your employer is paying in large sums as well.
Stock and Share, Bonds and ISA,s are also great ways to save.
Unfortunately  we see many posts on here about people nearing  retirement  with large Interest only  mortgages and  NO means to pay them off.

I'd rather have money in an 8% interest paying account than paying off my 1.4% mortgage.  And that's accounting for the tax implications.

To do otherwise would not be money saving.

Having a decent amount of savings gives you more options at every point in life.

Your opinion is sentiment and not based on mathematics.  Money saving is a mathematical decision.

Yep mine is 2% and I have the money in a 1 year fix at 6%. Free money!

This situation won't last long though and once my deal expires my mortgage will be cleared. 

Yorkie1

Obviously, your compulsory monthly repayment will be far higher on a 10 year term than a 30 year term. One factor to consider is your ability to deal with increases in those repayments if / when interest rates go up further, or your income drops.

With a longer mortgage, you have the flexibility to over pay (as long as you have the discipline to do so!) in good times, but are not in difficulties in harder times.

housebuyer143

Yes, this is my logic. I don't pay down my mortgage at all, in fact it's on interest only. 
I have my savings taking in the same interest as my mortgage or more and keep it in the bank as a liquid cash to access if I need to. 
You put it all in the house then it's very hard to get it out. A mortgage is the best loan you might get, large amounts at low borrowing relatively, so in my view I prefer to keep it running and pay the lowest amount I can.

Deedoodee

CSI_Yorkshire said:

dimbo61 said:

The good old Tax man is now taking a 20/40% cut out of the Interest you earn from savings once you earn more than £1,000/£500.
This website is all about Money Saving and there is a separate board all about Mortgage Free Wannabe!
Why because a mortgage is for most people the bigger debt they ever have.
Clearing the mortgage gives you more options later in life.
The first thing I would always do is secure the Roof over my head.
Pensions are great if your employer is paying in large sums as well.
Stock and Share, Bonds and ISA,s are also great ways to save.
Unfortunately  we see many posts on here about people nearing  retirement  with large Interest only  mortgages and  NO means to pay them off.

I'd rather have money in an 8% interest paying account than paying off my 1.4% mortgage.  And that's accounting for the tax implications.

To do otherwise would not be money saving.

Having a decent amount of savings gives you more options at every point in life.

Your opinion is sentiment and not based on mathematics.  Money saving is a mathematical decision.

Where are you getting 8% if you don’t mind me asking? My highest is 5%. Mortgage is currently fixed at 1.5% so not overlaying. but expires next year. If rates stay as is, my savings will get 5% but mortgage at 5.5% or 6%

CSI_Yorkshire

Easy access at the moment are around the 5%-5.5% range, but there are many fixed term bonds at 6%+ (1 year looks to have the best rates) and regular savers at 7%.  Several people track the best available regularly on the savings and investments bit of this forum (under banking and borrowing).

My 8% actually has a couple of investments in the same pot so isn't a true interest rate.

And I'll add the obvious warning - don't confuse investment returns with interest and don't rely on investments to pay your mortgage.  They can go down as well as up.

Sg28

CSI_Yorkshire said:

Easy access at the moment are around the 5%-5.5% range, but there are many fixed term bonds at 6%+ (1 year looks to have the best rates) and regular savers at 7%.  Several people track the best available regularly on the savings and investments bit of this forum (under banking and borrowing).

My 8% actually has a couple of investments in the same pot so isn't a true interest rate.

And I'll add the obvious warning - don't confuse investment returns with interest and don't rely on investments to pay your mortgage.  They can go down as well as up.

Top easy access is 4.5% 

BikingBud

Simple question gets a simple answer Yes - less interest paid than for a longer term mortgage but as others have pointed out that's not the complete story.

I think the most important consideration is understanding your situation and selecting what path suits you.
 
Only you know:

• Your pre-disposition and ability to save v spend. 
• Do you even have an excess funds to "worry" about or is 30 years the only option
• Your income and your aspirational disposable or discretionary spending funds.
• Your approach to risk and contentment with offsetting large debt against an illiquid asset.
• Your life position, age, employment, have or desire children. forthcoming costs (children to uni) etc

The principles are underpinned by basic maths and logic,

• Mortgage interest is compounded up and the longer the mortgage the more interest you will pay.
• Savings interest is compounded up and the longer you save the more interest you will get paid.
• Interest only mortgages will be less monthly payment but will defer the capital repayment, will your savings cover this? 
• Mortgage and saving interest will both vary over time, understand the impact of these changes.

Unfortunately humans don't invest in understanding the maths and are often totally illogical and are very happy taking "advice" from people on a website, they have never met.

Define your situation, your budget and your expected life pathway and then model it to see if it is achievable. Change; income, interest rates, savings and mortgage, be pessimistic to ensure you consider the worst credible outcome (BOE>10%) and then see how you would cope and tweak as required, seek new better paid job to cover shortfall or retire early.

But come up with your plan based upon your situation and your aspirations. Own your own future

 

CSI_Yorkshire

Sg28 said:

CSI_Yorkshire said:

Easy access at the moment are around the 5%-5.5% range, but there are many fixed term bonds at 6%+ (1 year looks to have the best rates) and regular savers at 7%.  Several people track the best available regularly on the savings and investments bit of this forum (under banking and borrowing).

My 8% actually has a couple of investments in the same pot so isn't a true interest rate.

And I'll add the obvious warning - don't confuse investment returns with interest and don't rely on investments to pay your mortgage.  They can go down as well as up.

Top easy access is 4.5% 

My labelling is unconventional, I include notice accounts in easy access because waiting a little bit is still "easy".

I realise most others don't though.