Mortgage advice (again)

[Diablos-666]

Went to the bank this afternoon to arrange a meeting about mortgage options and walked out with a Mortgage Lending Certificate

My query is to do with overpayments.

Is it worth getting a mortgage of 25 years and only making those payments each month

or

Get a longer term mortgage for say 30/35 years, pay less on the payments but pay extra in over payments on only the capital (staying within the overpayment agreement)?

Then after the 3/5 year mortgage term is up, re-mortgage on less years but having paid off more capital?


Or would I in affect actually pay less capital off by doing the second option?


The reason for the above is the mortgage rate is very high (6.14%) so want to reduce that as much as possible by the time I come to re-mortage.

I hope the above is easy enough to understand and sorry if I'm being dumb.

[scotal]

90% LTV? Well known bank that gives you Xtra?

Also their mortgage salespeople should have run through the ins and outs of overpayments/ term with you.


ETA, Whether you will save money by overpaying will depend on the amount you intend op'ing by.

If for instance your 25 year term would give a monthly payment of £1500 & your 35 year term would give an a monthly payment of £1100 but you overpay by £400 each month, so a payment of £1500 then you'll end up with a 25 year mortgage. If you overpay by £800 you'll end up with a shorter mortgage.
The only thing a 35 year term would give you in that situation is the ability to drop your overpayment should you so wish.

If you can afford it then set it up over 25 years and overpay by the max allowed.

Edited by scotal on Tuesday 15th November 15:46

[Diablos-666]

No it's a 95% LTV with Nationwide.

The guy only mentioned the limit for overpayments and the interest rate if you go over it.

[scotal]

Diablos-666 said:

No it's a 95% LTV with Nationwide.

The guy only mentioned the limit for overpayments and the interest rate if you go over it.

Ah, well you are limited to £500 a month overpayment.
You need to go back to him and ask the difference between a 25 year term and a longer term of your choosing.He should then give you some guidance on what overpayments will do for you in that situation.

[Diablos-666]

Well based upon a 142k mortgage over 25 years - repayments are £950, over 30 years it's £867

The overpayments was an afterthought of mine.

I'll have to do some research on it. Do you know of a decent online calculator I could use so I can work it out myself?

[Rollin]

Diablos-666 said:

Well based upon a 142k mortgage over 25 years - repayments are £950, over 30 years it's £867

The overpayments was an afterthought of mine.

I'll have to do some research on it. Do you know of a decent online calculator I could use so I can work it out myself?

http://new.egg.com/flashcalc/offsetcalculator/flexiwithremote.html

[scotal]

Diablos-666 said:

Well based upon a 142k mortgage over 25 years - repayments are £950, over 30 years it's £867

So if you can pay the £500 it will shorten the term dramatically. If you are confident of your employment, I'd go for the shorter term and overpay as much as poss.

Money Savings Expert has an overpayment calc I think.

[BoRED S2upid]

You can still get 95% mortgages? that suprises me.

[Diablos-666]

scotal said:

So if you can pay the £500 it will shorten the term dramatically. If you are confident of your employment, I'd go for the shorter term and overpay as much as poss.

Money Savings Expert has an overpayment calc I think.

Yes that is the logical thing to do but I can't afford to do that.

The reason I asked about the longer mortgage term was to get the re-payments down.

If I could only afford £900 a month on repayment would it be better to have a lower mortgage term (25yrs) and pay no overpayments or a longer mortage term (35yrs) and pay overpayments upto £900 a month?

Sorry for all the questions, this is my first time.

[scotal]

BoRED S2upid said:

You can still get 95% mortgages? that suprises me.

Few and far between.

[plover]

Diablos-666 said:

If I could only afford £900 a month on repayment would it be better to have a lower mortgage term (25yrs) and pay no overpayments or a longer mortage term (35yrs) and pay overpayments upto £900 a month?

It's the same thing the overpayment will go against capital owed and bring down your amount owed and therefore your interest

This site http://www.drcalculator.com/mortgage/uk/ is quite good for playing with the numbers. That site shows overpayment as prepayment. If you put in a mortgage of 142K at 6.5% over 35 years, you get a monthly payment of 857. Then update to have a prepayment(overpayment) of a 100 from month 1, brings the term down to 25 years and 1 month.

Also look at the summary info , to see the total you end up pay for the mortgage !.

[anonymous-user]

Consider what happens if interest rates go up. The base rate is 0.5% now and the mortgage rate in this example is 6.14%

Base rates could easily go to 5% in the term of the mortgage, maybe even higher.

I'd be inclined to get 6 months - 1 years worth of payments saved up before overpaying