Mortage questions

hornetstinger

hornetstinger

hornetstinger

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Joined
6 Sep 2016
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Say house is £125,000. £40,000 deposit, so £85,000 mortage

20 year mortgage £442 per month
25 year mortgage £372 per month
30 year mortgage £327 per month

You can pay 10% off per year on the remaining, so would it be better to go for 20 year mortgage paying more per month, but have less saved. Or to go for 30 year mortgage, and have more saved. And then pay large lump sum to pay the mortgage off early.

Or with either, pay off 10% extra per year.

Say if income is £1400 a month after tax.
 
It really is a difficult one to decide on, without the other outgoings known, and also what potential there still is for saving whilst on the 20 year mortgage. I personally would choose 20 years to get it over and done with sooner, potentially use other savings to pay it off early.

This is not financial advice, I am not a shop!
 
20 or 25 to begin with. Generally your salary (you hope) will go up as you progress so the cost will become less of an issue over time. How long is the deal you're looking at for? If you find after it ends, e.g. 3 year fixed, you can always change the length of the mortgage again at that point. I played it too safe and wanted to keep the monthly cost stable/down so went for 30 years on 5 year fixed but will change to a 15-20 year after on a shorter fixed deal.
 
Generally your salary (you hope) will go up as you progress
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Not in my jobs, if they go up they go up with NMW.

Let's say I save £500 a month after all bills and mortgage (30 year) paid for, morgage is about £4500 a year, so I would guess it would take 10 years to save up the 60K, minus the 20K I would have paid for the mortage to pay it off?

So either pay 20 year, with larger chunk per month, or 30 year but able to save up more per month on the latter. Either way though I could still pay off 10% per year.

I'm 42 so I think having shorter mortage will be better as I don't want to be having a mortage when I'm retired/close to retirement.
 
My situation is very similar to yours (albeit cheaper house with less deposit so similar mortgage) and I've had to go for a 30 year mortgage for "affordability" despite the 25 year payments being affordable from my budget. So I plan to overpay as if I was on the 25 year.
 
If you are able to definitely budget and do the shorter mortgage along with saving, why wouldn't you.
 
go for the minimum required monthly payments but overpay each month (checking you are not breaking and of the small print rules)
 
Only thing to consider is how unpredictable the future can be. Having savings in the bank can make all the difference if you're made redundant, get sick and so on.
 
hornetstinger said:
I'm 42 so I think having shorter mortage will be better as I don't want to be having a mortage when I'm retired/close to retirement.
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If you're 42 are they really going to offer you a 30yr mortgage? :confused: The answer to your question might be out of your hands.
 
As mentioned above you can change to suit your situation after your term ends anyway (presuming you go for a fixed term). I think you're calculating your savings available based on the rates staying exactly the same over 10 years, (which they won't).
 
edscdk said:
go for the minimum required monthly payments but overpay each month (checking you are not breaking and of the small print rules)
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This
Scam said:
If you're 42 are they really going to offer you a 30yr mortgage? :confused: The answer to your question might be out of your hands.
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Yup I would expect so, inlaws are in their 60s and have been offered 20 year mortgage recently.
 
Agree with above that its worth having savings, ideally 3-6 months at least in case you're out of work. With my mortgage (probably same for any overpaying), if you overpay then you can 'burn' through the overpayments if you need to take a payment break for the mortgage itself.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

Worth putting some figures into that. I started to overpay after the first year of mine by a small amount.

Question for others though.. I can overpay by 10% without penalty but I believe thats from the total amount due and not 10% limit on the monthly amount you pay? i.e. if its £500 a month then its not limited to paying £550 a month is it?
 
Duke said:
Agree with above that its worth having savings, ideally 3-6 months at least in case you're out of work. With my mortgage (probably same for any overpaying), if you overpay then you can 'burn' through the overpayments if you need to take a payment break for the mortgage itself.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

Worth putting some figures into that. I started to overpay after the first year of mine by a small amount.

Question for others though.. I can overpay by 10% without penalty but I believe thats from the total amount due and not 10% limit on the monthly amount you pay? i.e. if its £500 a month then its not limited to paying £550 a month is it?
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forgot to add its a good plan to look at the ones that allow you to pull the overpayments back...

id ask the lender about your question

also If I overpay 499 a month they recalculate the interest at the end of the year, if I overpay £500 a month they re-calculate each month (which saves a little money) - so its worth checking...

limits on overpayments (I think) are tight in the initial period but then drop off a lot (after 3 years I was able to overpay what ever extra I wanted)
 
The other benefit of a longer mortgage, at least in the current low interest rate climate, is that inflation will be nibbling away at the real value of the outstanding balance for longer as well.
 
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