Changing Mortgage Term During Discount Period.

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  • Changing Mortgage Term During Discount Period.
  • Short version:
    If a customer finds it hard to meet repayment mortgage payments during a discount period are banks usually quite happy to extend the term for little or no cost to the customer? I can’t see why they’d object since they’d be making more money but does anyone have any experience of it happening smoothly or otherwise?

    Background in the unlikely event anyone is interested, no need to read it:
    Hitherto I’ve set a ludicrously long mortgage term to keep the ‘required’ payments low and then used overpayments to pay off the mortgage at my desired rate IYSWIM.

    I’ve done this in case my circumstances change for the worse – if I hit hard times I just stop making the overpayments and no questions asked.

    I’m about to change products and now I’m in the happy situation where the sum borrowed is small and I can’t make sensible overpayments without paying early repayment fees.

    The simplest way to deal with this is put the term down to increase the required monthly payments, but that carries a risk if I hit financial problems. (I’m not expecting this, well no more than anyone these days.)

    wrightyson
    Member

    How much are we talking here, most providers will let you pay 10 percent over.

    How much are we talking here, most providers will let you pay 10 percent over.

    I’m allowed 20pc and that’s sadly/happily not enough to make sensible payments any more. But the outstanding balance is too much to (sensibly) switch to an unsecured loan.

    Flaperon
    Member

    And it’s 10% each year of the initial loan, so you can make relatively large payments in comparison to the outstanding balance once you’re a few years in.

    wrightyson
    Member

    So 20 percent of say 50k is 10k a year minus the payments your making. Even with that sort of amount you’re “finding” an extra 850 a month. I can’t fathom the figures as if it’s less total amount than that then surely you could just take that amount over say 6 years and pay it off without any overpayment?

    captmorgan
    Member

    Is it worth looking at a mortgage with an offset facility?

    Go for higher payments that your norm that fit the early repayment criteria of the lender and the balance into the off-set savings. Allowing you to drawback if times are hard or pay off early if not?

    finbar
    Member

    This might be comprehension failure on my part, but as I understand it:

    1. You want to minimise required monthly payments (to minimise risk) and then pay off an additional amount each month;
    2. 20% of your outstanding loan amount (I presume this will reset when you switch to a new product) is too small an amount to make additional payments “sensible”.

    I’d just take the risk and not fanny about setting a longer term that you then shorten if I were you – sounds like you can handle it comfortably and quickly, unless your profession is juggling chainsaws or something.

    Premier Icon tthew
    Subscriber

    captmorgan’s offset mortgage suggestion is a good one. Pay the amount of overpayment into the savings portion of the product and when the savings amount is greater than the mortgage amount either pay it off outright or pay the mortgage down from it, (is what I do). Once you are in this situation you are interest free but if you need a chunk of emergency money, you have that easily to hand.

    I’m with Coventry Building Society, they’ve been a pretty decent lot to deal with.

    I’d just take the risk and not fanny about

    As my wife puts it “Like normal people.” 🙂 ….and yeah, that decision’s already made I’m just wondering how easy it is to extend the term if required. I’ll ask them direct tomorrow, but I thought STW might have some relevant experience. As I said in the OP I can’t imagine it would be a problem – they make more money.

    unless your profession is juggling chainsaws or something.

    😀

    captmorgan’s offset mortgage suggestion is a good one.

    Yeah that would be perfect. Historically they’ve been too expensive but now they’re competitive (1.85% from Coventry, no fees). However my existing firm have a competitive product with no hassle of remortgage and legal costs. Thanks to both for the tip, though.

    …and the answer is *YES*.

    My provider will change term at any time including during the discount period. £25 cost, it takes 6 weeks and you have to send off proof of income guff.

    All of which makes my lifetime strategy of protecting myself from a rainy day by by picking a long term and then making over-payments to get the term I want an utterly pointless faff – if a rainy day had come I could have just changed the term. Joke’s on me, I probably should have asked. 😀

    Makes a bit of a mockery of overpayments limits as well, but I suppose they make £25 out of it.

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