20 or 25 yr term?

squibbs25

Currently have a mortgage with 19 yrs 10 months left, we are in the middle of re mortgageing, is it normal to go for a 20 yr term or back to 25yrs?

The difference will be approx £50 pm more for the 20 yrs as remortgage amount is for slightly more.

Am i right to stick with the 20 years?

Thanks for reading.

Squibbs

adr0ck

if you can afford i would

pay a lot less overall

martin1018

Try to stick with your original term, i.e. go for the 20 year.

I did this and come to the end of my mortgage this year. My sister and sister-in-law are both stuck with payments for years (about 20 I think) to come because they went back to 25 year terms whenever they re-mortgaged or moved. A mistake I think.

I'm sure someone will come along and give you the figures to prove one way or another, but for me getting rid of the debt asap was the main draw in keeping to the original term.

IMHO if you can afford the extra - do it.

_Andy_

Agree with the above. Long term cost will be significantly less.

m1ntie

I agree pay of your debt ASAP.

You could consider going for 25 years but make overpayments - that way if ever you get into financial difficulty through sickness or unemployment, you are in a better possition. ie lower payments and in front.

squibbs25

I did consider the over payments option, but the new payment @ 20 yrs would still be less than what it would be if we were to go on to SVR with our current lender (and that was without the extra top-up).

Does it work out cheaper to go for a shorter term , or a longer term and make over payments?

New mortgage will be for £60k @ 5.59 fixed for 10 years

snarffie

squibbs25 wrote: »

Does it work out cheaper to go for a shorter term , or a longer term and make over payments?

It works out exactly the same, as long as the overpayment amount each month makes up for the longer term.

For example, if you take out a 20 year mortgage, based on your figures, you'll pay £415.79 per month for 20 years.

The alternative is to stretch it over 25 years, with a monthly payment of £371.68. You then make overpayments of £415.79-£371.68=£44.11 each month. You will still be paying a total of £415.79, which is the same as if you were paying over 20 years, ie. the mortgage will finish 5 years early.


The basic difference is that you have flexibility with the 25 year option. If one month, you can only pay £371, that's all you'll have to pay. BUT remember, every time you don't overpay, you're mortgage stretches out that bit longer. You MUST be disciplined with this approach!

(figures based on whatsthecost website)

squibbs25

'You MUST be disciplined with this approach'

That's just it, not sure if i/we would be disciplined enough!

PHickman

It all comes down to personal preference / risk profile.

If you are in a secure job (as secure as it can be these days), then the likelihood of you requiring an immediately available pool of cash I]withdrawing your overpayments[/I is minimal... so stick with the shortest term you can afford to avoid the temptation.

If in the future you need of a pool of readily-available cash in a hurry [we're talking about redundancy / sickness here - not a 5-star cruise around the world!], and do not have a stash of cash under your mattress... then make overpayments so they can be retrieved in an emergency.

Most people do not, but if you happen to have redundany / sickness insurance cover, then that will provide your "readily-available cash" and so you have no need for an emergency cash-pool [your overpayments].!

That's how I see it anyway.

Graeme7777

Hi,

Do the sums (use a spreadsheet or online calculator) for the 2 options - you'll pay more per month over the shorter term but you could save a lot of interest.