Quick question about my mortgage

worriedfirsttimebuyer

I am 2 years into a 5 year fixed rate repayment mortgage at 5.29% from Halifax.
Annual statement came today and it's a bit rubbish to see we have only paid interest and virtually nothing off the loan.
We took the mortgage out over 34 years as we needed lower payments at the beginning, as 1st time buyers, we had nothing!
Now, we're in a better financial position (owe nothing to no-one) - was wondering if we should lower the term to 25, 20 or even less years?
What is the 'normal' term people take out?
Where would be the best place to put our extra money each month, if not off the mortgage?

Gorgeous_George

If you are young there is nothing wrong with a 34 year mortgage. Changing could be expensive.

As an alternative, max out your cash ISAs. They currently offer better rates than 5.29%. This gives more flexibility than overpaying or reducing the term.

GG

beecher

'normal' used to be 25 years - you should be trying to overpay as much as possible over the next 3 years, and then you'll be able to cut the term when you come to the end of the fixed rate. Just make sure you tell Halifax you're making a 'capital repayment' as otherwise I was told the money would just sit in the account and not be credited (that's what happened to mine for nearly a year!)

MarkyMarkD

I personally think there's a benefit in having lower mandatory repayments. You can always save up any spare cash and pay it off at the end of the 5 year fixed term without any penalties.

Most people traditionally took out mortgages over 25 years; longer terms like 40 years have only happened more recently because property prices have soared so much.

worriedfirsttimebuyer

I am 28 and my OH is 33. So we will be 60 and 65 when mortgage ends, we would prefer to have it paid prior to retirement.
As far as I am aware, the man at Halifax told me they charge £10 per change to the term and you can change it however often you like, up or down. Does this sound correct, or was he talking rubbish?
We currently pay £578 per month, reducing it to 20 years would be £723 a month, not a huge difference...should we?

beecher

worriedfirsttimebuyer wrote: »

I am 28 and my OH is 33. So we will be 60 and 65 when mortgage ends, we would prefer to have it paid prior to retirement.
As far as I am aware, the man at Halifax told me they charge £10 per change to the term and you can change it however often you like, up or down. Does this sound correct, or was he talking rubbish?
We currently pay £578 per month, reducing it to 20 years would be £723 a month, not a huge difference...should we?

why don't you overpay by £150/month, or save it up and overpay when the fixed rate comes to an end if you wouldn't be tempted by the savings (I would I think). Then you'll have an idea of how affordable it is, and can change the term later on?

worriedfirsttimebuyer

I think I'm being a bit daft here. Can someone explain to me simply how overpaying by £150 a month makes more sense than shortening the term?

JoJoArmani

it is depressing seeing that mortgage statement... took me about 6 years to see a real dent in the balance...

NeilQuinn

worriedfirsttimebuyer wrote: »

I think I'm being a bit daft here. Can someone explain to me simply how overpaying by £150 a month makes more sense than shortening the term?

Overpaying (as long as the total overpayment is big enough) has the same effect as shortening the term. If you shorten the term, you're committed to making a higher monthly payment & if things get a bit tight you may regret it. By making overpayments as & when you can afford to..it's your choice. Not something you're legally bound to.

Have a look on https://www.theoneaccount.com & see the calculators on there. It shows how you can shrink your mortgage by making ad hoc lump sums or regular overpayments.

worriedfirsttimebuyer

Ah I'm starting to get it now. Overpaying is a bit more flexible than formally altering the term. In that case, it would make more sense.

UK007BullDog

You can change the term when your current deal ends. Its free then.