Lowering term of mortgage buy continually re-mortgaging
Discussion
Arrangement fees for the re-mortgage? Good fixes to new customers often have a fee attached....
I do something similar for my mortgage, whenever a fixed-rate ends I swap to a new rate and reduce the term at the same time, if the new fixed-rate is lower....which is has been for a while (odd situation, given where interest rates are).
Broadly, paying extra monthly is a terrific investment, and massively reduces the mortgage term for C&I mortgages. Well worth doing irrespective of the product - most lenders allow 10% overpayments per annum without penalty, irrespective of the product.
I do something similar for my mortgage, whenever a fixed-rate ends I swap to a new rate and reduce the term at the same time, if the new fixed-rate is lower....which is has been for a while (odd situation, given where interest rates are).
Broadly, paying extra monthly is a terrific investment, and massively reduces the mortgage term for C&I mortgages. Well worth doing irrespective of the product - most lenders allow 10% overpayments per annum without penalty, irrespective of the product.
We paid off a 25 year one in nine years, just by overpaying. We left the monthly bit alone and every couple of months or so made another payment against it. There was no need then to reorganise the mortgage. Just had to be a bit careful to make sure that you triggered an interest recalculation when we made another payment on it.
anonymous said:
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You are aware that by reducing the mortgage term you will increase the monthly repayments?You be better off getting a decent rate & overpaying on the existing mortgage & chucking the arrangement fees/valuation fees/ product fees back into paying off the original loan.
anonymous said:
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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. darreni said:
anonymous said:
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You are aware that by reducing the mortgage term you will increase the monthly repayments?Personally I use an offset mortgage so that I can pay what I want, when I want, and still have access to every penny if I want it.
I'm about to do this, but slightly different circumstance. I got a mortgage over 35 years on a 90% LTV. I renovated the house and the LTV is now just under 70%. 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.
I can't see how it would work though if you don't increase the LTV and more importantly decrease the interest rate, if you switch from a 1.99% to a 1.99% then surely you're not really going to achieve much other than fixing the rate for a couple of years?! Or you'll be paying slightly more each year but reducing the term, could essentially do the same with over payments?
I can't see how it would work though if you don't increase the LTV and more importantly decrease the interest rate, if you switch from a 1.99% to a 1.99% then surely you're not really going to achieve much other than fixing the rate for a couple of years?! Or you'll be paying slightly more each year but reducing the term, could essentially do the same with over payments?
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)
Exactly. When you make a payment, particularly early on, it could be that £95 of £100 is paying interest and the amount you owe is lowering ever so slightly. Hence in early years your reduction in the amount you owe is only declining ever so slightly.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)
But pay an extra £10 and that is all off the amount you own, it not only reduces it, it also means that your regular amount it will/should start paying off a little more each time. So your £100 may pay off £5.10 of the load rather than £5.00 and so on.
And it escalated, hence the reason I paid off a 25 year loan in 9 years, we saved up and every few months made an additional payment to them and after each one our monthly payment paid off more capital and less interest.
Of course, that was in the 1990's, back on a deliberately simple mortgage that were happy at us doing it, but personally I'd have no hesitation at doing that sort of route over complex fee based mechanisms being described.
anonymous said:
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We had a bit of a similar thing when the Yorkshire refused us a remortgage because my Mrs had gone part time. Amazingly for a financial institution they actually over rode the computer generated answer when they realised we had been fine for 15 years and at the time 2 years of the Mrs being part time without them knowing. anonymous said:
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Mortgage is £200kHave an account with same bank that has £30k in savings.
on an offset you are only paying interest on £170k as they offset the savings against the mortgage, even though you still have those savings, so its like you have just put everything into the mortgage.
If you take £20k out, the interest on the mortgage is based upon £190k.
anonymous said:
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I have actually temporarily stopped overpaying my mortgage to ensure that I finish the renovation in time to re-fix at the lower rate as although overpaying will reduce the term, you can't beat knocking 8 years off your term, and reducing the monthly payments in one go. The downside, and I think will answer your initial question, is that you can only really do this once, and only if you can half the rate. Once I've done this it'll just be a case of overpaying to further reduce the term
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