Re-mortgage now or wait?
Discussion
edc said:
Why have such a long term if you have the means to repay in less than a third of the term?
I did similar with first direct as there is no cost or limitations on overpayments. So gives me the minimum contractual obligation in case circumstances change, but can make hay whilst the sun shines.
edc said:
Why have such a long term if you have the means to repay in less than a third of the term?
The rate isn't any higher for a shorter term and the minimum payment is lower.I could reduce the term massively but they I'd be up the wall every month worried if I could make that mandatory payment.
I'd really be up a creek if my interest rate doubled too.
I would ask why have such a short term when you could have a longer one!
Rick101 said:
The rate isn't any higher for a shorter term and the minimum payment is lower.
I could reduce the term massively but they I'd be up the wall every month worried if I could make that mandatory payment.
I'd really be up a creek if my interest rate doubled too.
I would ask why have such a short term when you could have a longer one!
This! I'm remortgaging currently and I'll be extending my term to 39 years, with a view to clearing it entirely in less than 15.I could reduce the term massively but they I'd be up the wall every month worried if I could make that mandatory payment.
I'd really be up a creek if my interest rate doubled too.
I would ask why have such a short term when you could have a longer one!
Unless you can 100% guarantee your circumstances won't change for the worse (and you have the self-control to consistently overpay) it's the sensible thing to do.
okgo said:
How does overpayment limits affect this? In 7 years, you may only be able to pay off 10% each year as an OP and I doubt you’ll get anywhere near clearing the other 30% through standard payments?
Use a deal without limits, I assume? If not possible for best terms then just slap the excess into one's own crude offset solution and once that fund is large enough, clear the debt. If the individual has a retirement target date that is aligned with the planned mortgage clearing date then arguably paying the excess into a pension can be much better than paying down the debt directly due to the clawback on income tax etc.
On a separate matter 2 yr swaps look to be out to 4.5 now, while 5s are under 4. Implies to me that the market has backed away quite strongly from the earlier hope that the FRD would be dumping rates early in '24? These numbers look to me like the general consensus is indeed back to higher for longer.
MikeE said:
It's certainly something that requires much consideration. Some IO punters have been caught out recently due to trying it in too much size and over too long a period. For me, the LTV would need to be well under 50 so no risk of needing the funds earlier and I wouldn't consider it if there weren't alternate, accessible funds in existence or my chosen point of draw-down free to change as I desired. In my mind it's only viable if it's not actually required. MikeE said:
That’s sort of what I’m doing at the moment but it’s risky.In 10,20,30+ years a lot can and will change.
The age you can access it, the allowances, will the 25% tax free amount get cut etc etc
Also if interest rates go through the roof you are left open.
I made a thread about creating my own endowment type mortgage situation - buy on IO - lump money into trackers, flog property/buy property at the end (assuming end is enough for market to do its work) with the money you've amassed - have a long enough term that you aren't forced into a move when markets are dire.
Admittedly it works quite well for those living in a city as there is a natural likelihood at one point to want to leave anyway, so the 'sell to pay the loan' repayment vehicle is based on an element of realism vs a kicking the can down the road situation which I'm sure many have done.
Haven't acted on it yet, but think I will do, but would want a half decent rate and fixed for a half decent amount of time...
Admittedly it works quite well for those living in a city as there is a natural likelihood at one point to want to leave anyway, so the 'sell to pay the loan' repayment vehicle is based on an element of realism vs a kicking the can down the road situation which I'm sure many have done.
Haven't acted on it yet, but think I will do, but would want a half decent rate and fixed for a half decent amount of time...
It’s what I had proposed doing when I bought a house in my mid 20’s to coincide with my mortgage being due for repayment at age 50. Tax free in via pension, 25% tax free out to pay off the equity.
Thankfully the plan changed about a decade in as now I can’t take my private pension until 57, and that’s as things stand. Might get pushed back again before I’m eligible for it.
Thankfully the plan changed about a decade in as now I can’t take my private pension until 57, and that’s as things stand. Might get pushed back again before I’m eligible for it.
Puzzles said:
MikeE said:
That’s sort of what I’m doing at the moment but it’s risky.In 10,20,30+ years a lot can and will change.
The age you can access it, the allowances, will the 25% tax free amount get cut etc etc
Also if interest rates go through the roof you are left open.
I can see another push back in the retirement age and a reduction in the amount you can get out tax free.
Frankly it's outrageous that they can move the goal posts like this, but what can you do, yet more erosion of the already paper thin trust in government and the social contract.
I started paying into my pension 20 years ago and have another 12 years until I can draw it down. That would have been 10 if they'd stuck to the rules when I started.
youngsyr said:
This is a real risk, IMO it's more likely than not in the next 10 years.
I can see another push back in the retirement age and a reduction in the amount you can get out tax free.
Frankly it's outrageous that they can move the goal posts like this, but what can you do, yet more erosion of the already paper thin trust in government and the social contract.
I started paying into my pension 20 years ago and have another 12 years until I can draw it down. That would have been 10 if they'd stuck to the rules when I started.
Quite. Mirrors my own view and pisses me off that the government can stick their nose in to change my own personal financial investment that I have had in place for decades already and a clear aim/age at its outset. State pension, I accept completely out of my hands but my private pension annoys me that the goalposts have moved as I’ve got closer to them. I can see another push back in the retirement age and a reduction in the amount you can get out tax free.
Frankly it's outrageous that they can move the goal posts like this, but what can you do, yet more erosion of the already paper thin trust in government and the social contract.
I started paying into my pension 20 years ago and have another 12 years until I can draw it down. That would have been 10 if they'd stuck to the rules when I started.
Inflation is still a thing, so most people can pay off a mortgage if their career does OK and they survive the first 10 years.
Say 10 years of 3% wage rises and you've got 30-odd % more income to do some repayment. And/or invest in other things.
I know people who are downsizing at 70 because they still have a nortgage. Boomers , eh?
You should think of your finances holistically, mortgage, pension, career, other savings.
It's much easier to be flexible about your career if you can survive with no income for a while.
There is a lot to be said for accessible savings. An offset mortgage worked for me.
I know a few people who are still working in their own businesses older than me, they're happy enough.
Not everyone wants to work the same career through to retirement, not everyone will get the choice.
Say 10 years of 3% wage rises and you've got 30-odd % more income to do some repayment. And/or invest in other things.
I know people who are downsizing at 70 because they still have a nortgage. Boomers , eh?
You should think of your finances holistically, mortgage, pension, career, other savings.
It's much easier to be flexible about your career if you can survive with no income for a while.
There is a lot to be said for accessible savings. An offset mortgage worked for me.
I know a few people who are still working in their own businesses older than me, they're happy enough.
Not everyone wants to work the same career through to retirement, not everyone will get the choice.
okgo said:
How does overpayment limits affect this? In 7 years, you may only be able to pay off 10% each year as an OP and I doubt you’ll get anywhere near clearing the other 30% through standard payments?
If you take a 3 yr fixed rate, just as an example, you have an unlimited overpayment point at the end of the 3 yr fixed if you remortgage, therefore if you took a 2 yr fixed you have quite a few opportunities within 7 yrs.Also, a broker can help pick a good lender i.e. Barclays allow an unlimited overpayment in the last month of any fixed rate.
okgo said:
How does overpayment limits affect this? In 7 years, you may only be able to pay off 10% each year as an OP and I doubt you’ll get anywhere near clearing the other 30% through standard payments?
I am on a fairly common deal with 10% maximum overpayment. I stay within that and have the rest into a S&S ISA. That's currently at around 6% so effectively offsetting the mortgage interest and a bit more.When the balance is low enough and the ISA high enough, I've an option!
I'm just back in here to add my name to the list of people singing sarnies praises. Getting us to fill in forms and reply to emails must be driving him crazy but he has been an absolute pleasure to work with, I'm certain that most brokers would have stuck us at the bottom of their to do list by now. 5 star Google review, would recommend.
s p a c e m a n said:
I'm just back in here to add my name to the list of people singing sarnies praises. Getting us to fill in forms and reply to emails must be driving him crazy but he has been an absolute pleasure to work with, I'm certain that most brokers would have stuck us at the bottom of their to do list by now. 5 star Google review, would recommend.
No problem at all, my pleasure 
DonkeyApple said:
MikeE said:
It's certainly something that requires much consideration. Some IO punters have been caught out recently due to trying it in too much size and over too long a period. For me, the LTV would need to be well under 50 so no risk of needing the funds earlier and I wouldn't consider it if there weren't alternate, accessible funds in existence or my chosen point of draw-down free to change as I desired. In my mind it's only viable if it's not actually required. For me I’ve always tried to see the worst case, so that if I had to sell my house I’ve made sure I’d have enough equity to buy somewhere that I’d actually want to live and be mortgage free. I don’t think I’d be doing it if the equity in the house wasn’t enough to buy something decent if I had to sell up.
The upsides are that it’s a 40% tax saving and, having just checked, my pension has done +15% this year. That far surpasses any interest paid on the mortgage. It also gives a lot of flexibility in that I can very quickly reduce the salary sacrifice and then, with discipline, use the taxed salary to pay down the capital if I changed my mind. I genuinely don’t see the point in a repayment mortgage if you’re disciplined and have a plan.
The downsides are the uncertainty and the government’s willingness to move the goalposts. It could go wrong but, as mentioned, the worst case would see me in a decent, but smaller, house and with a much larger pension than I would otherwise have had.
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