Lowering term of mortgage buy continually re-mortgaging
Discussion
Something was pointed out to us (me and my wife) today that we have never thought of.
Say you take out a mortgage over a 30 year term, and fix for 2 years. At the end of the 2 years, shop around for another mortgage / deal and reduce the term by a year, so rather than 28 years do it over 27 years. Fix in again for 2 years, and then when that one ends, shop around again, and lower it again, so rather than the now 25 years left to pay, re-mortgage for 24 years.
Effectively what happens, or we are led to believe will happen, is you reduce a 30 year mortgage to 20 years, and every couple of years you can improve your payments / avoid a sharp rise in monthly payment, assuming the deals are there for that to be possible.
Even if you were to pay a mortgage consultant a £500 fee every 2 years for arranging this, over the term of the mortgage, you have saved 10 years worth of payments and saved a shed load more money than it costs to arrange.
Forgive me for being thick, as we have never even thought of this, but it seems like a no brainer. Are there any obvious downfalls to this method that I am missing?
Say you take out a mortgage over a 30 year term, and fix for 2 years. At the end of the 2 years, shop around for another mortgage / deal and reduce the term by a year, so rather than 28 years do it over 27 years. Fix in again for 2 years, and then when that one ends, shop around again, and lower it again, so rather than the now 25 years left to pay, re-mortgage for 24 years.
Effectively what happens, or we are led to believe will happen, is you reduce a 30 year mortgage to 20 years, and every couple of years you can improve your payments / avoid a sharp rise in monthly payment, assuming the deals are there for that to be possible.
Even if you were to pay a mortgage consultant a £500 fee every 2 years for arranging this, over the term of the mortgage, you have saved 10 years worth of payments and saved a shed load more money than it costs to arrange.
Forgive me for being thick, as we have never even thought of this, but it seems like a no brainer. Are there any obvious downfalls to this method that I am missing?
Our income isn't high enough to substantially over pay, things will be extremely tight as it is when we do borrow.
I asked about the arrangement fee's, the advisor stated there are plenty of no fee options which remove these. Ultimatley I don't see why I can't just research it myself and organise a mortgage swap over personally every 2 years and decrease the term, thus removing the need for the mortgage advisor at all!
I asked about the arrangement fee's, the advisor stated there are plenty of no fee options which remove these. Ultimatley I don't see why I can't just research it myself and organise a mortgage swap over personally every 2 years and decrease the term, thus removing the need for the mortgage advisor at all!
vescaegg said:
The ones with no fees will have higher monthly payments. If you remortgage say every 2 years, you will prob not pay as much I guess but will still need a solicitor to do stuff and that'll cost.
Can't see why a solicitor needs to be involved in re mortgaging. They have had no involvement when we have done it in the past.fridaypassion said:
If you stick with the same lender you can normally just renegotiate fixes. The only time we have had to go through revaluing has been when we have moved lender.
Problem being, we fixed in last year as we were not expecting to be able to move. As such I liased with them, and they will not give us the mortgage we require. Not even remotely. Naturally,everywhere else will. As such we are going to have to swallow £10k in penalties to repay it early and take out a mortgage on another house.vescaegg said:
Not sure how it works if you're rate staying with the same lender as it may count as just switching product (Sarnie?) but if you move lenders then yes a solicitor needs to be involved to remove the charges on the house from one lender and give it to the other. You cannot do it yourself. The banks need copies of the house docs etc which a solicitor generally keeps.
Oh. Didn't know that!swerni said:
This .
James, assuming the same interest rate, reducing the term just increases your monthly payment each time you do it.
Either repay slightly or as elise said, get am offset.
The person who benefits most from you changing product every couple of years is the broker. ( assuming no decrease in the interest rates)
How does an offset mortgage work?James, assuming the same interest rate, reducing the term just increases your monthly payment each time you do it.
Either repay slightly or as elise said, get am offset.
The person who benefits most from you changing product every couple of years is the broker. ( assuming no decrease in the interest rates)
MrSparks said:
My 2 year fix at 4.29% is up in February and I've already talked to the banks about remortgaging or changing product with existing provider. The term will drop to 25 years (so wiped 10 years off my current mortgage) but the rate will drop to 1.99% due to the LTV, which cuts about £80 per month from my current payment. So I'll reduce the term by 10 years AND reduce the monthly figure which means with my over payments it'll still be overall a lot cheaper, allowing me to over pay more.
This is essentially the exact scenario that we have been advised is easily achievable - notwithstanding the arrangement fee on the mortgage + broker fee (if we used a broker).Gassing Station | Business | Top of Page | What's New | My Stuff