Mortgage question

[Whisky2014]

Is it better to reduce the term by paying more or keep the term the same and have more disposable income? Term could be reduced by 7 years at the rate quoted but payments are 1.1k a month or we can pay less but for longer hmmm

Personal preference really but we over pay every year when we have spare cash but keep the mortgage manageable in the mean time. We have reduced it by about 3 years so far doing this. Only had the mortgage for 5 years

Get rid of your mortgage! Think about it - for those 7 years at the end, if it's paid off, you'll have so much spare money. You could easily spend that money on nights out and holidays and things and have nothing to show for it.

But anything could happen. I could pay it off 7 years early then die! Holidays and nights out is living :D
Yeh maybe the overpaying is more reasonable.

Pay more you will pay less interest overall that way.

Yeh thats right. But do i want to commit to the higher payment. I just dont know!

Do you need to commit? Does your mortgage allow you to overpay by X % per annum? You can just make additional payments as and when you want to.

Have a look at how much more interest you will pay if you keep the term the same, and reduce the payments. A mortgage feels like a necessary evil, so we tend to think that it costs what it costs.

You save so much if you pay it off early, if you can possibly manage it, it is definitely worthwhile.

I think so think its 10%. The question is if we would actually over pay though or be tempted to buy stuff, holidays etc.

We overpay every month - just changed the DD so it comes out automatically. Our mortgage let's us use this overpayment for a payment a holiday should one of us get made redundant etc so it's a good back up for us.

We've kept the longer term to keep the monthly payment manageable. We then overpay each month (each time keeping the term the same, just reducing the monthly payment).

We haven't reduced the term because we want to ensure that if something happens we can stop the overpayments

I am allowed to overpay by 10% of the initial capital each year. That is a huge sum when you consider overpayments are capital only and is fairly standard across mainstream mortgages so would likely apply to you (but obviously check).

I would do that, using Martin’s calculator to see how much you want to overpay by:

www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

That way you have the flexibility of a longer mortgage but the capacity to keep the length down. I just have my DD set up for 33% extra compared to what it should be which reduces the discipline required.

Have you looked at offset mortgages? Flexible ones will let you pay more without penalty and allow you to withdraw money if you need it. That way you aren't tying the money up but while it's in there it is working and earning interest.