25yr Mortgage & Overpay or 20yr Mortgage?

Rob_B_8

Just had a quick thought as me & the GF will be buying VERY soon...

If you get a 25yr mortgage its cheaper per month but more expensive over the long term.

If you get a 20yr its more per month but cheaper long term.

Is it plausible & worth it to get a 25yr mortgage but overpay each month (within the penalty free limits of course) therefore the term 'could' be only 20yrs but if you need to take a break you can just not overpay?

Or even take a 30yr and do the same? (doubt we'd do this though!)

This seems too simple, we want a 20yr but want to factor in some freedom for unexpected events so is this the answer?

Cheers folks!

Rob

LouLouHelen

Best thing in my opinion is to go with the option that gives you a bottom line affordable monthly cost and then make overpayments as and when you can afford to. Then you are not commited to the overpayment part should you not have the cash one month or need to spend it on something else like repairs etc. I think was I am saying is don't commit to shorter term and then find out money is tight - I think I would go for 25 or 30 years.

Joe_Bloggs

Many mortgages have a 'sweet discounted' period where you can adjust to your new financial shackle. Then they give you SVR. You can review your options eg. length of mortgage close to this time. It is not uncommon for borrowers to have to remortgage as many lenders tend to target new custom hoping for SVR apathy and ignorance of 'tie in' terms and conditions.
J_B. (My first mortgage lasted 16 months and cost £600 in total to change.)

Rob_B_8

trying to go with A&L but just found out you can only overpay 10% in jan each year?! how crap!? they have a 4.45% fixed for 5yrs which we want, any similar rates allowing overpayments each month when you want?

innovate

Sounds like a flexible mortgage / offset mortgage would suit you? Presume you have worked through Martin's article on mortgages ?

May be start with the lowest possible fixed rate traditional mortgage that lets you change without penalties after a few years, when you know better how your finances as a home owner work out?

Rob_B_8

read the article yeah, i was happy with A&L as its a good rate, OP in jan only is annoying but what we'll do now i think is still go for it but over 25yrs, stick any spare cash in my egg savings (i know theres prob better rates, but its just so easy with egg MM!) and OP each Jan.
We're interested in a fixed at first to settle in as said above but then who knows?
I never really thought of a 25yr before but its £60/month cheaper so that helps if we get stuck or want to save a little to buy something!

Any more comments welcome though!

YorkshireBoy

Rob_B wrote:

...stick any spare cash in my egg savings (i know theres prob better rates, but its just so easy with egg MM!) and OP each Jan.

Any more comments welcome though!

I take it both your ISA's are full then?

mountainofdebt

I think I would be happier going for the longer term and making overpayments when I could...that way you have given yourself a comfort zone should your circumstances change.

Also, and this is a personal opinion here, but if you are only allowed to make overpayments in January, there is nothing stopping you putting the money in a savings account (whose APR is more than your mortgage APR, thus earning you money). You could save more than the 10% than you are actually allowed to pay off and when you come to move mortgages at the end of your discount period, paying what's left in the savings account so that your new mortgage is actually less than the balance outstanding, hence making an overpayment by the back door.

YorkshireBoy

mountainofdebt wrote:

Also, and this is a personal opinion here, but if you are only allowed to make overpayments in January, there is nothing stopping you putting the money in a savings account (whose APR is more than your mortgage APR, thus earning you money). You could save more than the 10% than you are actually allowed to pay off and when you come to move mortgages at the end of your discount period, paying what's left in the savings account so that your new mortgage is actually less than the balance outstanding, hence making an overpayment by the back door.

Exactly, and hence my ISA comment.

OP would receive 3.6% (assuming basic rate tax-payer) at Egg Savings, whereas he would receive 5% in a Halifax ISA. That's a 39% increase in savings interest.

Robert_Sterling_3

25 years and overpay up to £500 per month consider Nationwide Building Society.

Rob_B_8

got a abbey postal ISA from when their rates rocked (bad of me but i dont know what its paying now!) its a pain to put money in/out which is why i use egg more, anyone know a good ISA i can manage online?