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Overpaying, reducing term and switching mortgages
greg85
Posts: 11 Forumite
Planning on remortgaging with the same lender within the next few months. If I overpay my 118,000 mortgage with a lump sum of 10k and choose to use that to decrease my mortgage from 25 years to 22 years will I need to go through the affordibility checks again when I remortage with the same lender as the original term was reduced? Or does reducing term by overpaying is not treated the same as changing term from 25 to 22 years at the time when you remortgage without overpaying?
Would choosing to use the overpayment sum to reduce the monthly mortgage payment and not the term work out virtually the same if I keep overpaying the difference every month and also give me extra flexibility?
Porperty value 136,885
Current rate 2.89%
LTV after 10K overpayment 78.90%
Thanks in advance for your help!
Would choosing to use the overpayment sum to reduce the monthly mortgage payment and not the term work out virtually the same if I keep overpaying the difference every month and also give me extra flexibility?
Porperty value 136,885
Current rate 2.89%
LTV after 10K overpayment 78.90%
Thanks in advance for your help!
0
Comments
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You always go through full checks when remortgaging ( rather than a product switch with the same lender) regardless.
The consensus is for the disciplined, is that is much better not to reduce the term to ensure flexibility. Makes no difference to the final outcome if the monthly payment reduce or not as you just up your overpayment to match the reduction.0 -
As above you want a product switch not to remortgage to avoid full checks.
If you overpay the lump sum beforehand any new rate should be offered on the LTV after the overpayment has been made.
We did the exact same thing several years ago to get us into the next LTV band and thus better rates.
Overpaying has the same effect as reducing the term, but if you can't afford to do so one month then there is no contractual obligation to do so, so it's much better for flexibility to keep not change the contractual term.
if you want to formally change the term you will need to go through new affordability checksMFW 2020 #111 Offset Balance £69,394.80/ £69,595.11
Aug 2014 £114,750 -35 yrs (2049)
Sept 2016 £104,800
Nov 2018 £82,500 -24 yrs (2042)0 -
Thanks for your replies. By remortgaging I meant switching products with the same lender, sorry for the confusion.0
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