Advice please -due to remortgage.

ajr

Our 2 year fixed rate is up in July.We will have around £26000 left to pay and 7 years of the term. When we remortgage I would like to reduce term by a year or even two if we can afford it. Its a repayment mortgage as we previously had interest only but cashed in endowments and used them and compensation from misselling to reduce our mortgage.Would this be better than keeping same term but overpaying or is there no difference.Sorry if this is a stupid question but canot get my head round it all.Thanks

LouiseJ

I dont think there is any difference if you get you deal fixed on a reduced term or if you overpay. I will say however that if you go for reduced term then thats it, you will have to make the payments and could possibly get a better deal on a more restricted mortgage where you cannot overpay without penalties.

A more flexible mortgage for the remaining term would allow you to overpay what you like (within the terms of the deal) so if you could afford more then you wouldnt be penalised.

Just depends on whats best for you really. I would say watch out for the charges though when you do re-moartage on such a relatively low mortgage they can really bump up the price and sometimes it will be worth going for a higher interest rate with less fees attached than the lowest rate available.

ailuro2

Don't pay high fees to switch to a good mortgage deal for such a small amount.

If your current SVR isn't extortionate and you can overpay as much as you like, and can afford to overpay, then do the maths.

For a mortgage of £27000 you'd pay around £135 a month just in interest at 6%, £157 at 7% and so on, so as you can see paying a high arrangement fee (many are around £800-£999:eek:) would get rid of the £18 a month interest saving pretty quickly.

Do your sums, if you could pay a bit off your mortgage at the start then keep overpaying, you could save even more than you would paying a high fee.

There is no difference in the amount saved when you overpay, or reduce the term, it's six or half a dozen. Reducing the term commits you to a higher payment every month, overpaying voluntarily means you can sometimes still access the money, so it depends how good you are at leaving the money alone!!:D

ajr

hi
Thanks.I did wonder if it would be worth remortgaging with the high fees. Will perhaps see what our payments go to once 2 years up in july and then decide. I think we will stay on current term with the option to overpay as some months are better than others!

mah_jong

When my fixed rate came to an end and I had less than you outstanding, I got a percentage below the SVR for the remainder (my thousands were in single figures by then). So I was happy to stay, still overpaying ...just counting the months!