On our house with Santander we got initially a two year fixed over 35 years, after the two years we have fixed for another 5 years at a cheaper rate, so I just decreased the term by 4 years so get the payments at the same rate. Easy

I’m glad how this thread has panned out as I feel the 30 year option is sounding more and more sensible… or at least not too far from the ball park of sane.. if having this much organised debt is sane..

The next thing to work out is if I should pay off my student loan (circa 10k left) before putting the rest into the mortgage… maybe I need another thread in 6 months!

The student loan rate will more than likely be a cheaper rate than the mortgage rate

I’m glad how this thread has panned out as I feel the 30 year option is sounding more and more sensible…

This.

The term means nothing if overpayments are allowed, so pick a long term.

I seriously doubt you’ll have the flexibility of picking between a 20 year and a 30yr mortgage.
Nationwide refused to give me a 30yr mortgage after I told them the monthly payments i could afford equalled to a 28yr mortgage.

Nationwide would give us up to 40 years (which we took them up on), just said it had to be repaid by age 67. Really didn’t care beyond that! They make more money out of you, assuming no overpayments, anyway.

According to this: http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator#results

£136k at 3.6% over 20 years you’ll be paying £796 per month and after 5 years you’ll still owe £110551.

£136k over 30 years you’ll be paying £618 per month and after 5 years you’ll still owe £122196.

If you overpay by (796-618)over 60 months you’ll lowe that by £10680 to £111516 still owed.

So a difference of £965 between the two terms. It’s a small(ish) price to pay for flexibility, if you are allowed to overpay that amount and have the discipline to do so.

Bought our current house 5 years ago amid the tail end of the final crisis and major job worries for me. Mrs North was v keen to fix to lock in a known monthly cost.

Five years later I’ve paid a shed load of unnecessary interest (note that mortgages are loaded so that you pay proportionally more interest early on). The fix ends in April.

We’re going to end up borrowing a chunk of money to spend on an extension + loft conversion. In light of market wobbles I doubt rates will rise this year, and even then only slowly. I’ll be damned if I’m going to take out another fix. I’ll just take out the additional borrowing over the same term as the balance of the mortgage.

But that’s because I’ve been a homeowner for nearly 15 years, so have a better idea of costs. A fix isn’t a bad idea for the FTB as it helps budgeting in a world where he roof, boiler and everything else is now your problem!

If it were me I’d go variable. I have been on various different variable mortgages over the last 20 years, and I am several tens of thousands of pounds better off than if I had taken fixed rate mortgages.

YMMV of course.

Suburban reuban how did you come up with the 111516 figure…. I make it 110514 after 5 years of overpaying….

Did you forget to remove the element of interest you wont pay on the balance by paying off prinicpal before it attrActs interest.

Suburban reuban how did you come up with the 111516 figure…. I make it 110514 after 5 years of overpaying….

Did you forget to remove the element of interest you wont pay on the balance by paying off prinicpal before it attrActs interest.

Possibly – I’ve lost me bit of paper – but your figures look even better for the OP.

£136k at 3.6% over 20 years you’ll be paying £796 per month and after 5 years you’ll still owe £110551.

£136k over 30 years you’ll be paying £618 per month and after 5 years you’ll still owe £122196.

£136k at 3.6% over 20 years you’ll be paying £796 per month and after 5 years you’ll still owe £110551.

£136k with a 30 year *term* but choose to pay £796 you’ll be paying £796 per month and after 5 years you’ll owe still £110551.

The arbitrary agreed term makes no difference.

I looked into it, and you’re right, there appears to be no drawback to getting a 30 or 40 year mortgage and overpaying it every year, effectively turning it into a 20 year mortgage but with the option to massively ramp down payments if, for instance, you lose your job or something.

That’s exactly what I do, for exactly that reason. It’s not critical – I’m sure the building society would let me go interest only if I was in big trouble, but with a long term the minimum payments might be small enough that I don’t even need that conversation.

I guess the confusion her might be term has two meanings:

a) The time it takes to pay the mortgage.
b) The number you write on the form at the bank.

a) Affects the amount of interest you pay, b) is a totally arbitrary number, unless you’re obliged/choose to stick to it.

There’s a lot of rubbish being posted on this thread.

1) Take the longest term possible. If you need a lower mortgage payment using a longer term because you’ve changed to a lower paid job or your other half is on maternity pay, the bank aren’t likely to bend over backwards to help, so take the longer term whilst they’re offering it.

2) Over pay as if you’re on a shorter term. The 10% overpayment you’re allowed is 10% of the balance of the loan – ie, if you take a 150k mortgage, you can pay off £15K or so in overpayments in the first year.

3) Fixes cost more for a longer fix. As others have said, view a fix like an insurance policy. Again, think about if you’ll have kids or want to get a job that’s less aggro and less money.

4) Overpay. Overpay. Overpay. If you overpay, most lenders will not shorten the term of the loan unless you ask. So if you need to stop overpaying, you’ll have the benefit of a lower payment than you would have had if you’d never overpaid at all.

5) Have I mentioned overpaying?

All clear in my head Terry apart from point 4… so do you recommend overpaying that makes your monthly payments smaller or overpaying that shortens your term time? I thought we were going with the shortening of term time was the right one?

Shortening the term is the right one… Over payments to reduce monthly payment is more expensive in the long term.

shorten the term always the term ….

most banks will make your monthly smaller automatically – you need to request that you want to reduce the term rather than the monthly payment.

And even with this i find my self having to phone to remind them from time to time – random mortgage amounts get taken from time to time – always below the value i want them to take – EG decembers was about 100 quid shy of what it should be. 30 seconds on the phone and they have sorted it with minimal moaning and they even take off the equivalent interest for the time between them taking the payment and me phoning them – i have all the letters they send out after ive instructed them to take XYZ a month….

My BS don’t take a DD – I pay by transfer/standing order so the bank have no control over term at all.

Great idea outofbreath – thanks for the help all!

The student loan rate will more than likely be a cheaper rate than the mortgage rate

Yes, but the bank will consider the student loan repayments against pay and will reduce the amount they’ll lend you. It helped to pay mine off, but it was only about 5k at that point.