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Should I extend mortgage term if due large payout in 10 yrs
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Hols_blue
Posts: 7 Forumite
Hi there
we are due to renew next year and currently on 1.5% so it’s going to hit us bad. We owe 250k but have just inherited and plan to pay 100k off soon leaving £150k which will keep our monthly payments the same as what we pay now. My question is, my husband retires in 10yrs and will get a large bulk payment (£100k). I’m thinking therefore to extend our mortgage term so our monthly payments are cheaper as we know we can pay most of it off in 10yrs. Would that make sense? I’d like to benefit from paying the large bulk off now but only way to do that is extend the term.
we are due to renew next year and currently on 1.5% so it’s going to hit us bad. We owe 250k but have just inherited and plan to pay 100k off soon leaving £150k which will keep our monthly payments the same as what we pay now. My question is, my husband retires in 10yrs and will get a large bulk payment (£100k). I’m thinking therefore to extend our mortgage term so our monthly payments are cheaper as we know we can pay most of it off in 10yrs. Would that make sense? I’d like to benefit from paying the large bulk off now but only way to do that is extend the term.
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Comments
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You'll pay a lot more in interest if you extend the term, so the overall cost will be higher.
For example, you owe £100k and have a mortgage rate of 4%
Paying it off in 5 years will involve a monthly payment of £1,842 and the total cost of the mortgage (including interest) will be £110,499
Paying it off in 10 years means a monthly payment of £1,012 but a total cost of £121,494
Paying it off in 15 years means £740 a month in payments, but a total cost of £133,1440 -
Personally I would not extend the term, neither would I bank on the £100k in ten years time, that is more than enough time for a company to go bust, so unless that is contractual (rather than discretionary), from a government department and completely iron clad, then plan to pay the mortgage off normally.0
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Extending the term doesn't make it "cheaper". Ultimately will cost you far more in terms of the amount of interst you'll pay. Also may leave you exposed to higher interest rate levels in the future.1
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Hoenir said:Extending the term doesn't make it "cheaper". Ultimately will cost you far more in terms of the amount of interst you'll pay. Also may leave you exposed to higher interest rate levels in the future.0
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chile_paul2 said:Hoenir said:Extending the term doesn't make it "cheaper". Ultimately will cost you far more in terms of the amount of interst you'll pay. Also may leave you exposed to higher interest rate levels in the future.0
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Emmia said:You'll pay a lot more in interest if you extend the term, so the overall cost will be higher.
For example, you owe £100k and have a mortgage rate of 4%
Paying it off in 5 years will involve a monthly payment of £1,842 and the total cost of the mortgage (including interest) will be £110,499
Paying it off in 10 years means a monthly payment of £1,012 but a total cost of £121,494
Paying it off in 15 years means £740 a month in payments, but a total cost of £133,144
Looking at the OP's question, they are effectively deciding between taking a 15/20/25 year term and in each case paying it off in 10 years.
The actual differential cost is how much extra interest they would pay in the next 10 years, not over the original term of the mortgage. Maybe that's what you calculated, but it doesn't sound like it to me.0 -
BarelySentientAI said:Emmia said:You'll pay a lot more in interest if you extend the term, so the overall cost will be higher.
For example, you owe £100k and have a mortgage rate of 4%
Paying it off in 5 years will involve a monthly payment of £1,842 and the total cost of the mortgage (including interest) will be £110,499
Paying it off in 10 years means a monthly payment of £1,012 but a total cost of £121,494
Paying it off in 15 years means £740 a month in payments, but a total cost of £133,144
Looking at the OP's question, they are effectively deciding between taking a 15/20/25 year term and in each case paying it off in 10 years.
The actual differential cost is how much extra interest they would pay in the next 10 years, not over the original term of the mortgage. Maybe that's what you calculated, but it doesn't sound like it to me.
If they take a longer term but pay off early, the cost of any Early Repayment Charge would also need to be factored in.1 -
Emmia said:BarelySentientAI said:Emmia said:You'll pay a lot more in interest if you extend the term, so the overall cost will be higher.
For example, you owe £100k and have a mortgage rate of 4%
Paying it off in 5 years will involve a monthly payment of £1,842 and the total cost of the mortgage (including interest) will be £110,499
Paying it off in 10 years means a monthly payment of £1,012 but a total cost of £121,494
Paying it off in 15 years means £740 a month in payments, but a total cost of £133,144
Looking at the OP's question, they are effectively deciding between taking a 15/20/25 year term and in each case paying it off in 10 years.
The actual differential cost is how much extra interest they would pay in the next 10 years, not over the original term of the mortgage. Maybe that's what you calculated, but it doesn't sound like it to me.
If they take a longer term but pay off early, the cost of any Early Repayment Charge would also need to be factored in.0 -
Hoenir said:Emmia said:BarelySentientAI said:Emmia said:You'll pay a lot more in interest if you extend the term, so the overall cost will be higher.
For example, you owe £100k and have a mortgage rate of 4%
Paying it off in 5 years will involve a monthly payment of £1,842 and the total cost of the mortgage (including interest) will be £110,499
Paying it off in 10 years means a monthly payment of £1,012 but a total cost of £121,494
Paying it off in 15 years means £740 a month in payments, but a total cost of £133,144
Looking at the OP's question, they are effectively deciding between taking a 15/20/25 year term and in each case paying it off in 10 years.
The actual differential cost is how much extra interest they would pay in the next 10 years, not over the original term of the mortgage. Maybe that's what you calculated, but it doesn't sound like it to me.
If they take a longer term but pay off early, the cost of any Early Repayment Charge would also need to be factored in.1 -
Hoenir said:Emmia said:BarelySentientAI said:Emmia said:You'll pay a lot more in interest if you extend the term, so the overall cost will be higher.
For example, you owe £100k and have a mortgage rate of 4%
Paying it off in 5 years will involve a monthly payment of £1,842 and the total cost of the mortgage (including interest) will be £110,499
Paying it off in 10 years means a monthly payment of £1,012 but a total cost of £121,494
Paying it off in 15 years means £740 a month in payments, but a total cost of £133,144
Looking at the OP's question, they are effectively deciding between taking a 15/20/25 year term and in each case paying it off in 10 years.
The actual differential cost is how much extra interest they would pay in the next 10 years, not over the original term of the mortgage. Maybe that's what you calculated, but it doesn't sound like it to me.
If they take a longer term but pay off early, the cost of any Early Repayment Charge would also need to be factored in.0
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