How to reduce my term, not my monthly repayments?

kimwp

jackieblack said:

Manchester2024 said:

jackieblack said:

Manchester2024 said:

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

That article specifically says:
“Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.”

If you continue to make overpayments, the current mortgage term will be reduced ‘naturally’ (at some point the overpayments will total the remaining mortgage balance and the mortgage will be repaid) while leaving the flexibility to cease/reduce the overpayments if necessary in the future.

What confuses me though is that it also says:

“If your mortgage provider alters your repayments to keep the term the same, although it will boost your monthly disposable income, you won't save on your interest payments, and the lender will earn more. So be sure to tell it to keep your monthly repayments fixed.”

Yes, if the lender reduces the required monthly payment, you need to continue to pay the higher amount.

So for example (just using simple numbers for ease), if the monthly payment requested by the lender is £500, but the borrower makes an overpayment and the lender recalculates the new monthly payment to be £450, if the borrower continues paying £500 each month that will be an additional £600 per year overpayment and over time all those £600s will add up to equal the outstanding balance a few years earlier than the mortgage would be paid off if the borrower had only paid the reduced payment.

(I know it’s a bit more complicated with changing interest rates etc, but the principle is the same)

I believe what would happen in this situation is that the lender would keep recalculating the monthly payment to maintain the term length. It makes no difference if you won't hit the overpayment max.

JMZ555

Every-ones finances are different but for me I wanted flex-ability with my money instead of lowering the years.
I build up a savings pot then do lump sum off mortgage. Extra money saved each month goes back into pot un-till next lump sum paid.
+ Extra emergency cash while you build next lump sum.
+ Each time you do lump sum you lower your monthly outgoings giving you choice to save more or less each month.

Ignore the years left and keep doing lump sum payments, most banks allow 10% per year.

I should be mortgage free by end of year following this, I wish I had started this as soon as I got my house.
  

jackieblack

kimwp said:

jackieblack said:

Manchester2024 said:

jackieblack said:

Manchester2024 said:

Mark_d said:

Why do you want to reduce your term?  A shorter term commits you to a higher level of payments over a shorter number of years.

Rather than committing to this higher amount, I think it's better to have a lower level of repayments.  This way you can pay a small amount when finances are tight...but you can overpay when you have surplus cash

Because of articles like this one making it clear to me anyway that you should prioritise reducing the term rather than the monthly repayments, unless I’m getting that wrong?

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

That article specifically says:
“Overpaying and shortening the mortgage term do exactly the same thing. Yet overpaying has the advantage that you can stop it if you want or need to.”

If you continue to make overpayments, the current mortgage term will be reduced ‘naturally’ (at some point the overpayments will total the remaining mortgage balance and the mortgage will be repaid) while leaving the flexibility to cease/reduce the overpayments if necessary in the future.

What confuses me though is that it also says:

“If your mortgage provider alters your repayments to keep the term the same, although it will boost your monthly disposable income, you won't save on your interest payments, and the lender will earn more. So be sure to tell it to keep your monthly repayments fixed.”

Yes, if the lender reduces the required monthly payment, you need to continue to pay the higher amount.

So for example (just using simple numbers for ease), if the monthly payment requested by the lender is £500, but the borrower makes an overpayment and the lender recalculates the new monthly payment to be £450, if the borrower continues paying £500 each month that will be an additional £600 per year overpayment and over time all those £600s will add up to equal the outstanding balance a few years earlier than the mortgage would be paid off if the borrower had only paid the reduced payment.

(I know it’s a bit more complicated with changing interest rates etc, but the principle is the same)

I believe what would happen in this situation is that the lender would keep recalculating the monthly payment to maintain the term length. It makes no difference if you won't hit the overpayment max.

Yes, at some point - IME, on a Fixed Rate Mortgage the mortgage payment wasn’t recalculated under the end of the term when the rate changed, and I think overpayments over a certain amount would trigger a recalculation. 
As long as the borrower keeps on paying the same amount, as the MPs reduce the overpayments just increase.