Savings or Shorter Morgtage Term?

dynamoMan

I'm about to remortgage and have a bit extra salary since I first bought my flat. I'm considering reducing the Term on my morgtage from 25years to 10years with the spare money I can afford to do that. The thinking being that it should save me loads of money on interest.

My dilema is this - I plan to move to a bigger property in a couple of years, am I doing the right thing reducing the term on my existing morgtage? Or should I be putting the extra cash into savings for my next purchase?

dimbo61

This depends on the new mortgage rate and savings rate which you could get.
work out what it will cost you for the new mortgage over 25 years at the rate the mortgage company have quoted you, then go online and find one of the mortgage calculators and work out the mortgage over 10 years.
Yes paying off the mortgage over 10 years will save you thousands of £££ in
interest but can you afford the £200/300/400 extra each month ?
Find out how much you are allowed to overpay each month with your lender
Nationwide allow £500 a month. some allow only 10% overpayment a year,
and some allow NO overpayments so read the T & C ,s carefully.
You might consider reducing the term to say 15/20 years and making
overpayments so that you do not stretch yourself too much !
The more you have paid off your mortgage the more equity you have
and the bigger the deposit you have to put down GOOD LUCK

Ma77hew

Are you planning to let your flat when you move?

If so assuming the rent would cover the current mortgage on a 25 year term it might be worth you saving the cash for the deposit on the new house.

House prices look like their going to go down for the next year or 2 so if you can afford to keep your flat when you move it might be better to sell in 5 years or so.

That way you could be buying at a low price but not selling at a low price. This could be better than any interest earned from savings or paid in mortgage.

The worst case scenario would be you pay a lump sum off your mortgage the next time its up for renewal.