To think that it's best to have a longer term mortgage and overpay?

[chatenoire]

As opposed to a shorter term one and feel suffocated by the payments

Yes, that's right...

Frankly sounds like the entire purchase having been an overstretch.

Absolutely. If the mortgage allows for overpayments, it's perfectly valid to go for a longer period and plan to overpay to reduce the term, which allows you to reduce those overpayments if things get tight, rather than just going for a shorter term which doesn't allow that flexibility.

The danger is that you don't overpay when you can and obviously end up paying more in interest than you need to.

And it's less of a consideration now, but it also means that if you find savings rate overtaking mortgage rates, you can divert overpayments into savings instead.

Agree OP

Bear in mind that some (fixed-term) mortgages limit the amount you can overpay.

Do whatever’s best for you, but I got both my mortgages over a 17-year period instead of the usual (at the time) 25 years, and paid more each month but less overall. Interest rates were of course very much lower and more stable in those days, and it would probably be unaffordable now. (I had assumed my salary would keep on rising so I’d have more money as the years went by, but Cameron and Osborne’s ideological austerity/public sector pay freeze meant I had no further pay rises for the last 6 years of my mortgage repayments.)

I also had a 17 year mortgage, yes and in hindsight, yes 25 years would have been better.

That’s what we did on our first house. The overpayments allowed us to purchase a much nicer house the second time with a shorter term.

This is remortgaging for a smallish amount (100k) but the difference in monthly payments is £1200 of 5 years Vs 25 years

Most only let you overpay by 10%

And I've run that on a spreadsheet which means that we could pay off our mortgage within 14 years, probably fewer years of we overpay at time of remortgaging

It's what we did. We fixed for 5 years at a time then reduced the term each time we remortgaged.

usually You can overpay by 10% a year without penalty. I’d go for 25years-over pay by 10% and then put any extra cash into savings. When the initial fix is up then use any of the savings amount that you feel comfortable using to pay off the balance and then repeat.

Yes exactly that! What I like is that if we decide to go on holiday or whatever it's not a big deal, it gives the flexibility that a shorter term can't give. Same if say, one of us is made redundant

We knocked 15 years off the mortgage by decreasing the term + paying a lump sum every time we mortgaged. Will be mortgage free at 50 years old now so only 4 years to go.

Longer term but make sure that your agreement means that you have very generous overpayment limits. Some don't.

I agree. I wanted to over pay as this gave me the option of taking a payment break without any issues, if I ever needed it. I didn't. Also meant I paid my mortgage off earlier

Each to their own really. We shorten the term and increase the premium so we don't spend it elsewhere. It's still a manageable amount. Each time the fixed term is over we knock a few years off. We probably won't be able to do this next time thanks to liz truss but are on 7 years instead of 17.

It's actually 20% now.

And if you have more you want to throw at it, put it in savings and pay a lump sum each time the term expires and you remortgage.

That's what we've done consistently. We'll be done in 2 years which is 9 years in total.

In most cases it should make no difference mathematically - for example borrowing 180k at 4.9%:

1. 25 years, payments are £1040/month, you pay back £313k over 25yrs.
2. 35 years, payments are £900, you pay back £377k over 35yrs.
3. 35 years but overpay £140 and you pay pack 313k over 25 yrs. ie. 1 and 3 are essentially the same.

If you can't afford £1040 either now or at some point in the future (mainly while you are on the initial fixed term) then 3) does give you some flexibilty. You could overpay less at certain times, and overpay more (possibly restricted to 20% max) at other times, but note that overpayments have a significantly bigger beneficial effect in the early years of a mortgage. As others have pointed out, if you can save at 4.9% or higher then it makes sense to save instead of paying back on the mortgage.

Yes it’s what we’ve done, and you can overpay however much you like at the end of every deal so the 10% problem isn’t much of an issue.

As long as you are happy about paying much more overall if you don't overpay the equivalent difference, then go for it.

I think it's a good thing to do. We overpay as much as we can. If you fall on hard times then you don't need to come up with so much cash because your default payments will be smaller.

Make a good spreadsheet and stick to it so you don't pay more in interest than you need to.

We'll be better off regardless (as I'm using an inheritance) BUT I'm starting to think that paying our mortgage early isn't necessarily the panacea and that I'd rather have a more relaxed life style

There are obvious benefits to overpaying however people on these threads rarely factor in the time value of money. So overpaying today doesn’t generate the huge financial benefits most overpayment calculators promise, just because money today is worth so much more than money in the future (due to inflation over time). Certainly not worth paying the mortgage early at the expense of a life today.