Remortgaging Options

[EnglishRain]

I was wondering if I could have some thoughts on what you would do in my shoes?

Our fixed deal comes to an end this year. 20 years left to pay (meaning I'd be 48 and DH 51 when it's paid off). Currently pay £1400 a month. We can afford it, but we have a DC due in two weeks, and with Covid and the uncertainty around the economy, I'm debating whether we should extend the term.

Logically, we could extend it by 5-10 years, have more money each month we could put in savings, and then use that to overpay the mortgage to being the term down if we don't need it. I am wary of how easy it may be to spend the extra cash we have. I guess I'm just feeling a bit twitchy, and more risk averse than usual. We don't have 6 months of bills saved up, only about 3 months worth, and we won't be able to crank that up any more until after I go back to work.

Cursory estimates suggest extending by 10 years would save £500 a month, and by five years, about half that...

I would say if you were just planning to use the money for savings and have enough money for your outgoings etc then I would not extend the term.

Extending the term will mean that you pay back more interest in the long term.

How about looking at it the other way?

Martin Lewis has a mortgage calculator online.

I bet by overpaying ever so slightly, you will knock years OFF!

That would be fab.

I'm usually totally in favour of overpaying a mortgage and reducing the overall term, but in your case, for the best future, I think your thoughts of extending the term and then later on overpaying sounds great.
My children are now at uni and in sixth form and looking back, the years from when they were born to when they started school were definitely the years we had the least money. In our case, because we have no family nearby we had to pay enormous amounts of childcare costs. Plus, being self employed, I earned much less during pregnancy and the we first few months after they were born.
In my opinion it's better to have a bit more money (and less money worries) when they are small and then overpay your mortgage once they start school.

If you do extend be rigid and pay the original mortgage payment until you need it. Every month the original amount goes into paying the mortgage and savings. No ifs and buts. Have the mindset of "its the same amount still."

Then if you do hit a rough patch due to covid (Brexit will be worse) then you can just pay the mortgage and stop saving or use the savings.

Every year make an overpayment baring any rough patches so that your term is still the same and you are not paying any extra interest.

In your shoes I would extend it. However I would be rigid to make sure i had the savings built up.

I would also get the lowest longest fix I could subject to the clauses, restrictions and penalties so look closely related to the level of overpayment and penalties.

Not all mortgages have the same terms, some banks are more flexible than others. 1.8% on better terms may be more worthwhile longterm than 1.4% with lots of clauses and rigid rules regarding overpayment.

If your property has increased in value, you may get a better interest rate and pay less each month - mine reduced by £100 when I remortgaged - not much but it’s something

I extended the term on mine and don’t regret it. It’s worked for us. Discuss it with a mortgage broker to ensure you’re fully informed

Remember if you have savings if will affect any entitlement to benefits should shit hit the fan.

If you have 20 years left and can overpay now, you could have it payed off in 18 years.

That's £1400 / month to put your new child through uni.