Better to overpay, or reduce term?

techno12

I'm remortgaging in a couple of months.

Currently have 27 years left, but I'm thinking of cutting this to 20 years when I remortgage. It'll cost me another £100 or so.

My question is, is it better to do the above, or to leave the term at 27 years and overpay by £100 a month? Or is there no difference?

Many thanks!

Gorgeous_George

There is no difference other than flexibility. Go for the best deal based on interest rates and fees.

GG

techno12

Thanks.

Looking to apply for the HSBC Tracker + 0.48 (they put it up by 0.1% today, grr!) - seems like a great rate (about 1% less than IF are offering me to stay with them) and no tie-ins or anything..

jonesMUFCforever

techno12 wrote: »

Thanks.

Looking to apply for the HSBC Tracker + 0.48 (they put it up by 0.1% today, grr!) - seems like a great rate (about 1% less than IF are offering me to stay with them) and no tie-ins or anything..

What about the arrangement fee??

techno12

jonesMUFCforever wrote: »

What about the arrangement fee??

£100 LESS than IF (£599 vs £699). For me, it's a no-brainer...

Jag1978

The HSBC one is the most flexible mortgage I've seen in my hunt. I was lucky and got in with the 0.38 Tracker. Mine was also £599 arrangement fee, which I just paid with debit card.

The only downside is time it takes to set up. They reckon about 6-8 weeks. Mine has been in the pipeline for about 2 weeks now got a call today from HSBC and was told that my application has been approved subject to evaluation. The only thing holding it up according to HSBC is getting the relevant redemption figures from my old lender Halifax!!

Regards

Jag

snarffie

I got onto the tracker at +0.23%, the day before they upped it to +0.38%, so I was lucky I suppose.

Previously with Nationwide, we were reducing our mortgage term each time we fixed, so were on 14 years instead of 19 years.

I decided, bearing in mind that we are moving to a 'riskier' tracker to put the mortgage term back to the original 19 years. This reduces our obligatory monthly payment. We will then make up the difference by standing order to make sure that we still pay off in 14 years at most.

This way, we get the best of both worlds. A low monthly commitment if we struggle in future, with the option to overpay to reduce the term. Because the tracker is completely felxible in terms of overpayments, there is no reason to reduce term/increase monthly payment. It only puts you at a disadvantage.

snarffie

Jag1978 wrote: »

The HSBC one is the most flexible mortgage I've seen in my hunt. I was lucky and got in with the 0.38 Tracker. Mine was also £599 arrangement fee, which I just paid with debit card.

The only downside is time it takes to set up. They reckon about 6-8 weeks. Mine has been in the pipeline for about 2 weeks now got a call today from HSBC and was told that my application has been approved subject to evaluation. The only thing holding it up according to HSBC is getting the relevant redemption figures from my old lender Halifax!!

Regards

Jag

The 'flexible' element I would have liked is a drawdown facility, but I don't think that this is available on this product.

Btw, my documents came through VERY quickly after application. Unfortunately, the final legal document has gone missing in the post, so I phoned them on Friday to ask for another to be sent.:rolleyes:

maveli

snarffie wrote: »

The 'flexible' element I would have liked is a drawdown facility, but I don't think that this is available on this product.

Btw, my documents came through VERY quickly after application. Unfortunately, the final legal document has gone missing in the post, so I phoned them on Friday to ask for another to be sent.:rolleyes:

snarffie,
Excuse my ignorance, What is a "drawdown facility" ? I too got this at 0.23 above BoE thinking it is the best flexible I can find.

snarffie

maveli wrote: »

snarffie,
Excuse my ignorance, What is a "drawdown facility" ? I too got this at 0.23 above BoE thinking it is the best flexible I can find.

It just means that if I overpay by, say £500 per month for a whole year, with some mortgages, I would have an overpayment 'pot' of £500x12months=£6000. If I then wanted to access any of the £6000 that I'd overpayed, I could 'draw-down' some or all of that money. With HSBC, I don't think I can do that.

My strategy is to pay the minimum on the mortgage each month until I have filled up my ISA with £3600. As soon as my ISA is filled up, I overpay the mortgage. That way, I have savings to draw upon instead.

maveli

snarffie,
Thanks. Never thought about that.

Thanks
Maveli