Paying off a flexible mortgage question?

Question

I have a flexible mortgage of around £75,000. I keep up with the repayments every month and often repay an extra £150. Someone told me that I should re negotiate the term of the mortgage. But why, can someone explain how this would be beneficial to me. As I see it, if I reduce the repayment term then the standard monthly repayments will go up and I will have less spare cash to make voluntary overpayments? Thanks

Answer 1

In the US, typically the shorter the term, the lower the interest rate.  You'll pay the bank less money over the course of the loan.

Answer 2

Your mortgage term is already being reduced as you are making extra payments and that is reducing overall debt. This means that you are paying less interest. I can not see what you will achieve by re negotiating and reducing the term? All that will achieve is that you will be locked into a higher monthly payment.

You can always look around and see if you can find a cheaper (as in interest charged) deal and that will reduce your term further. You might have to pay lenders fees, valuation fees and legal fees if you move to a different lender and that might reduce substantially any benefits.

You can check different mortgage type on http://www.mortgagebrokers4london.co.uk  and also ask for free "mortgage health check"

Answer 3

yes... but the point of reducing the term is to reduce the overall amount you pay to them in interest; this is far more efficient than making overpayments since it really depends what those overpayments are actually functioning as.

I would wager that your overpayments are counted into an account that you can tap into if you want to take a payment holiday, I'd definitely suggest having a chat with your provider.

Answer 4

flexible mortgage you can pay whatever you want there is no term per sae. its based on what you pay, not something fixed at the beginning.

Answer 5

The significant cost is the Interest Rate .. if you are paying the Mortgage Co's 'standard variable rate' you will almost certainly be paying 'over the odds'

Check if the Mortgage Co. is offering any flexible mortgage with cut-price Interest deals for new customers .. if so, ring them up and suggest they put on the lower interest deal without charging you .. (this will typically 'lock you in' for 2 or 3 or 5 years) ..

If they refuse, tell them you are considering moving your Mortgage to get a better deal (they may then change their minds) ..

There are a lot of fees involved in moving your Mortgage (legal, valuation, application etc etc, so you may be better off staying where you are .. use Excel to spreadsheet the total cost & repayments under the various offers over 3 or 5 years ..