Spare cash and mortgage

[peterwilson]

Hi
I've a 35 year term mortgage and can meet the payments no hassle.
Should I

a. Reduce the term
b. Make regular over payments?

Or is there anything else I should think of doing?

Thanks
Peter

 

[Thrifty]

From the sound of it both would have the same affect - you need to ask the mortgage provider or try yourself to calculate the figures. Might be better to make the regualar overpayment off the capital or make a oneoff yearly off the capital amount owed. What you need to consider also is the procedure, costs etc to reduce the term and how easy would it be for you to change it again if your sitauation changed. At least if you are just making voluntary overpayments you can always stop if you have an emergency/ call on the extra money one month. I'm not sure about this but depending on how much mortgage interest you pay you might be able to get a greater tax relief if you changed the term and upped your monthly payments. I'd personally contact the mortgage provider and get some figures before deciding.

 

[ClubMan]

Yes - making lump sum or regular over (capital) repayments will reduce the cost and effective term of the mortgage. You don't need to explicitly renegotiate the term. Just make sure that your lender understands that you want any excess over the normal repayments set against capital immediately. Put your instructions clearly in writing to them to be sure and so you have some comeback in the event of any mistakes. Don't forget that if you clear your mortgage early then you also save on the mortgage protection life assurance premiums that you would otherwise have to pay. I would not worry too much about mortgage interest relief or let it influence me too much as it's marginal in the greater scheme of things.

 

[conor_mc]

Run the numbers using this calc....

http://www.jeacle.ie/mortgage/ie/

I't tend to agree with thrifty, if you make overpayments you always have the option of reverting to your standard repayments if money gets tight. If you change the term, you no longer have this option. The net effect is the same though, so why close off the option?