Should I reduce the term of my mortgage?

[Daisy09]

Hi there,

I am looking for some advice as to whether this is a good option for me. I am currently 4 years into a 35 year mortgage and have a rate of ECB+ .8% (and feel very lucky!). At one stage my interest rate was over 5% so our mortgage repayments have dropped considerably. I have enquired as to how much it would be to reduce the term of our mortgage by 5 years and this will cost us an extra 163 euro per month which is fine. My reasoning for doing this is that we would hope to move house in about 5 years and we were hoping by doing this (ie. reducing the term) that we would have more paid off the main loan of the mortgage. As it stands we have paid a pittence off the actual loan in the last 4 years, nothing compared to all the money we pay each month on the mortgage. Is this how it works or will I only see the benefit of reducing the term when the 30 years are nearly up? We are regular savers but also trying to combat our negative equity in another way and are not sure if this is the best option.

Any advice would be greatly appreciated!

 

[anuj21k]

Sounds a good option if you can afford it. Take into consideration the fact that interest rate will go up soon as at present rate it doesn't seems sustainable.

 

[TonyD]

Interesting one - you are being charged 1.8%, which as you say is quite low.

In a regular saving account you can get upward of 4.00%.

Taking into account DIRT I would still say saving the money may be more of a benefit.

And with overpayments they are gone when they are made, and should you in future require funds, or whatever reason, at least the savings can give you a buffer.

I would make overpayments when the savings rate are lower than the mortgage rates.

Its all swings and roundabouts really, each would have a different opinion and only you can make the decision.