Hi Brendan,
One thing that many consumers overlook in this decision is the term length and they do not understand how compounding works. Lots of people are offered 35 year terms because it makes the monthly payment look good but it ultimately costs them a significant amount of money. Fixing for 5/7/10 years with a 35 year term is not a good idea if you don't intend to overpay either during the term (if allowed) or by lump sum at the end of the term.
This is about the only time it makes sense looking at the total interest paid over the life of a mortgage. Even on Avant's new 1.95% rate, the difference between 25/35 years is huge. Much more significant than occasional switches. Ideally consumers do both, switch and accelerate payments
One thing that many consumers overlook in this decision is the term length and they do not understand how compounding works. Lots of people are offered 35 year terms because it makes the monthly payment look good but it ultimately costs them a significant amount of money. Fixing for 5/7/10 years with a 35 year term is not a good idea if you don't intend to overpay either during the term (if allowed) or by lump sum at the end of the term.
This is about the only time it makes sense looking at the total interest paid over the life of a mortgage. Even on Avant's new 1.95% rate, the difference between 25/35 years is huge. Much more significant than occasional switches. Ideally consumers do both, switch and accelerate payments
Term | Interest rate | Total interest (300k mortgage) |
---|---|---|
20 | 1.95 | €62.5k |
25 | 1.95 | €79k |
35 | 1.95 | €114k |