Remortgaging

[PontypandyPioneer]

Hi! Hoping someone here can help...

Current mortgage deal is due to end soon. We'd like to move again in about 6 years time (will probably be to something more expensive)

Do we:

1. Keep the term the same and lower the monthly payments

Or

1. Lower the term and keep the payment about the same

I'm just a bit confused as initially it seems to be the interest not the capital we'd be paying off so is it worth it for a relatively short period of time?

On the other hand, if we happen to stay here it means the mortgage will be paid off a lot sooner.

Previous advice has been to lower monthly payments but I think I'd rather try to lower the term - if we're moving surely it mean we'll have more equity in our current house which will help for the deposit on a future house?

Thanks in advance!

I assume you face this dilemma because you can get a lower interest rate. Can you afford your current payments or is it tight to keep going at that level? If it is comfortably affordable and you have adequate savings for emergencies, then shortening the term may make sense. Otherwise I'd lower the monthly payments BUT aim to overpay what you can. How you overpay depends on the terms of the mortgage - make sure it reduces interest payments from the point you overpay.

Generally when you come to the end of your current deal (typically 2-5 years) you remortgage for the number of years you are now at eg I had 9 years left so I've remortgaged for 9 years. Otherwise the length of time you have to pay won't go down. If you can afford more it's worth shortening the term eg rather than 23 years, choose 20 years

Thanks for replies - yes we'd be able to get a significantly lower interest rate. Our current mortgage has quite a high rate due to my husband's previous credit rating which we've worked hard on fixing so he can now get "normal" high street credit.

We manage fine on the amount we pay now and the only other debt we have is one credit card between us which will be paid off in about a year.

Always always, overpay and ask for capital not term to be reduced.

If you manage OK on what you pay now, I would keep the payments the same and lower the term.

If your jobs are less stable and you need to build up some savings, then lower the payments, and overpay when you can.

It depends whether you want flexibility (a lower monthly payment but using the difference to make an overpayment each month to lower the overall amount) or certainty (lowering the term and keeping the payment the same).

5-6 years is quite a long time really, so I would probably choose the lower payments but promise myself I'd overpay and make sure that standing order was set up ASAP.

@MyDcAreMarvel sorry for being daft - what do you mean? I thought if you overpay it would come off the capital and term would automatically be reduced?

Our current mortgage was arranged for 30 years, but we're out of our 2 year fixed rate soon (so 28 left) and could potentially remortgage with another company at a lower interest rate, pay the same and the term would be 20 years.