Is this a good mortgage strategy?

DingDongitsKingKong

Currently on a 2% mortgage rate. Im 3 years into my 5 year fixed rate and the life of the mortgage is for 20 years. Chances are the interest rates will go up massively when my fixed rate ends which has got me thinking.

When the fixed rate ends, should I opt for extending the life of my mortgage to reduce monthly payments and go on 2 year fixed rates. When those 2 years are up I pay off the mortgage in lump sums as much as I can reasonably afford. I don't believe you pay interest on the down payments when you remortgage. Not sure how this works.

MorningcoffeeIV

You'll end up paying a lot more interest. So the only reason to do it would be to relieve immediate financial pressures.

So your objective will determine if it's a good mortgage strategy. If you're financially stretched, look at your wider circumstances beforw extending the term.

MWT

MorningcoffeeIV said:

You'll end up paying a lot more interest. So the only reason to do it would be to relieve immediate financial pressures.

... but only if the mortgage actually does go to the full term...

It is a reasonable strategy to reduce the fixed monthly outgoing, but accumulate spare cash in an interest bearing account then reduce the capital outstanding at the end of the next fixed period.

The term can always be reduced again later on...

DingDongitsKingKong

MWT said:

MorningcoffeeIV said:

You'll end up paying a lot more interest. So the only reason to do it would be to relieve immediate financial pressures.

... but only if the mortgage actually does go to the full term...

It is a reasonable strategy to reduce the fixed monthly outgoing, but accumulate spare cash in an interest bearing account then reduce the capital outstanding at the end of the next fixed period.

The term can always be reduced again later on...

Yeah that was my thinking. I'd still hopefully pay the mortgage off early by paying big chunks off at the end of the fixed rates. I'm also of the impression that it being one of those things everybody would do if it was that simple so am trying to get some views on this.

CSI_Yorkshire

DingDongitsKingKong said:

MWT said:

MorningcoffeeIV said:

You'll end up paying a lot more interest. So the only reason to do it would be to relieve immediate financial pressures.

... but only if the mortgage actually does go to the full term...

It is a reasonable strategy to reduce the fixed monthly outgoing, but accumulate spare cash in an interest bearing account then reduce the capital outstanding at the end of the next fixed period.

The term can always be reduced again later on...

Yeah that was my thinking. I'd still hopefully pay the mortgage off early by paying big chunks off at the end of the fixed rates. I'm also of the impression that it being one of those things everybody would do if it was that simple so am trying to get some views on this.

It's the "paying big chunks off" idea that stops everyone doing it.  Lots of people don't trust themselves to actually keep the money aside and think they might just spend it on other things.

Plus many people don't understand the concept of not overpaying if you can make more interest elsewhere - they see paying the mortgage as fast as possible as the most moneysaving option.