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good morning oh intelligent ones.... and you thick ones as well...

i haven't really got a problem, but am looking at my finances eeeeekkkkk... my mortgage...

since the interest rates dropped i have maintained my previous payments.... to do this, the bank has reduced the term so effectively i would pay the mortgage off sooner because the additional amount reduces the capital. it seemed logical to pay off the capital while interest rates are low, so when interest rates increase i would be paying a higher rate of interest on a reduced capital therefore, in the long run would be paying less interest...

to me, this felt like a logical thing to do, but i have been told this is a crap idea...

apparently it is more viable to pay a lower amount over a longer term.....?

if i pay over a longer term i could save about £170.00 pm, but surely even if i invest this every month its still not viable because i wouldn't get as high rate of return on an investment as i would be saving by overpaying on a lower interest rate on my mortgage...

i hope i have explained this ok... im not a numbers person, so can someone please explain the reasoning behind paying less over a longer period as opposed to more over a lesser period..?

thanks for your input..

nx

http://www.bbc.co.uk/homes/property/mor ... ator.shtml

Try this link, it will explain in simple terms of how it works and also works out what you can afford to pay back etc. The last thing you want to do, is take on a short term high rate mortgage(Depending on your finances) because you never know what will happen in the future.
Good luck.

thanks for that storm...

its a flexible mortgage, so at this stage i can change the payments and term as i want to without paying any additional fees... although that may change in the future..

nx

Obviously if you are paying short term you can pay it off in less time and less interest will be added..
The only problem with flexible mortgage, there are loop holes to the agreement..
If you have only been paying the high repayments on a short term Mortgage for a short period, and your circumstances change, you can request a lower pay back rate, but this may mean that you will end up back at the beginning and all you have invested will be lost..
Some of these banks have you by the nuts, with their small print..Anyhow, if you are considering a mortgage, best to go with the one you can afford, one that you can manage for X amount of years.. I know it is tempting to 'pay off quick'..This is just one of them times in life you have to be sensible (I hate that word)...

Good points Storm, not bad at all
NX, I will add to what Storm said, you need to figure out if you have any other debts and what your payments per month , remember this is after tax money from your job.

If you dont have any debts ( credit cards, loans etc) then use the extra money you have and pay down the mortgage, if you have debts, you might be best to consolidate the debts into the mortgage and figure out a comfortable payment structure where its not going to stretch or kill you every month.

You should consult with a Mortgage broker that specializes in Refinancing and knows the clauses hidden and can explain the different types of financing, from Lenders SRV, to Offset mortgages, Capped , flexible, buyers to let etc.

Lots of Mortgage brokers/agents out there, most of them couldn't find their asses with both hands on a good day, and some of the bankers out there are a piece of chicken short a snack pack.

morning...

i dont have other debts and its not about affordability either... i can afford to pay the increased amount but i just want to make sure i am making my money effectively work for me...

thanks for you advice...

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Just a few things that have been said to me about mortgages.

1. A mortgage is usually the cheapest way to borrow money. Compare the rate you are paying with a loan from a bank or a credit card. If you overpay the mortgage you are treating it as short-term high-repayment-rate bank loan.

2. If you continue paying, say, £300 a month over the next 20-odd years, consider how many hours you would have to work to earn that £300. When you took out the mortgage? Now? In 5, 10, 15 years' time? The percentage of your working week that is devoted to servicing that loan reduces over time as your earning capacity increases, provided you are happy to take the gamble that your rise in earnings will at least match the rate of inflation over the course of the mortgage.

3. If you can afford to reduce the capital, make sure that you aren't reducing your ability to purchase outright other items which you need because using shorter-term loans are much more expensive. Make sure too that you won't be penalised by the lender treating a rapid "pay-off" as if you had really taken out a short-term loan.

It's all a personal judgement call really. But i will say, having down-sized after my divorce and been able to purchase my current home outright - the relief at not having to meet the mortgage payment each month is fantastic!

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