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REDUCE TERM OR OPT FOR REDUCED MONTHLY PAYMENTS

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REDUCE TERM OR OPT FOR REDUCED MONTHLY PAYMENTS

4 replies 111 views
MrsBibiMrsBibi Forumite
3 posts
First Post
MoneySaving Newbie
Hey All,

Just spoken to Santander about over payment's on my existing mortgage. I've been told I may be asked to either choose to reduce my term on the mortgage or reduce monthly payments on my fixed monthly mortgage payments. Slightly confused  :/ not sure which to choose. 

Any help will be appreciated

Thanks

Replies

  • SistergoldSistergold Forumite
    527 posts
    500 Posts First Anniversary Name Dropper Photogenic
    ✭✭
    If your monthly payment is a bit high then reducing monthly payment and thus keeping the same term will be good, you will still save on interest but this saving will be less than when you overpay and you reduce the term thereby keeping monthly payment the same. 
    In my case my mortgage is very high so for a while I will overpay and choose to reduce monthly payments. But after sometime once I have reduced it to a lower monthly payment I might then opt to reduce term every time I overpay. 
    So the short of it is that the greatest interest saving for you will be to reduce term but make sure you are very comfortable with your current monthly payment cos once you reduce term some lenders will not increase it again without full mortgage application if you should need to reduce your monthly payments due to financial hardships. 
    Hope that helps.
    Initial mortgage balance £487500,
    Mortgage start date first week of July 2019,
    Mortgage term 23yrs(end of June 2042🙇🏽‍♀️), 
    That’s 8418 days 😒
    Mortgage payments 15 out of 276
    Target is to pay it off in 10years(by 2030🥳). 
    MFW start April 2020 mfw#136
    £12K in 2020 challenge #148
    To save £100K in 48months start 01/07/2020 @£13570 SoFar
    Am a single mom of 4. 
  • MrsBibiMrsBibi Forumite
    3 posts
    First Post
    MoneySaving Newbie
    Hello,
    Thank you for your input. My monthly payments are low. Took my mortgage in 2013 got a real good interest rate last month fixed for 2 years. Thought it was a good time to start make over payments if and when I can. Didn't actually occur to me that I would be asked to either reduce the term or choose to lower monthly payments. 

    Taking into consideration what you have mentioned reducing term may be a good option.

    Thanks 
  • edited 14 July at 9:07PM
    family355family355 Forumite
    12 posts
    10 Posts
    edited 14 July at 9:07PM
    Hi, Echoing Sistergold and just to add I am with Santander too, If you bank with them you can sign in online/app and your mortgage account should appear (if not you can add it using your mortgage account number) you can choose whether to reduce the term or payment and it gives you the savings in interest for each way 🙂
  • MrsBibiMrsBibi Forumite
    3 posts
    First Post
    MoneySaving Newbie
    Hello,
    Yes it was mentioned I could do it online. The lady did say I may be prompted to make a decision which I wasn't sure about which way would work out better.


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