Re-Mortgage to Reduce the Term

Re-mortgaging to reduce the term is a pretty straight forward process let’s look at a typical example of when this might occur.

A First Time Buyer took out a mortgage on their new home, the product was a 2 year fixed rate deal at 3% and they spread the mortgage over a 30 year term in order to keep the monthly repayments as low as possible. Their reason being that they wanted to furnish the property and felt that keeping the repayments low during the initial 2 years would reduce the financial pressure. 2 Years pass, the house is now fully furnished and one partner has got a promotion, the initial financial burden has been subdued and they have some spare cash left over at the end of each month.

Their 2 year fixed rate deal is about to expire and they start to shop around for a new product, now would be a perfect time to investigate reducing the term and thus reducing the total amount of interest repayable.

Don’t Shorten the Term if you can over pay !

It’s important that you fully understand all the features of your mortgage product as they aren’t all the same. Some mortgages especially variable rate mortgages may allow you to make overpayments of any amount and at any time during the loan term. By doing this you would effectively reduce the mortgage term with the added benefit of being able to cease making overpayments should you wish to do so at any time.

Some mortgage products such as fixed rate deals may only allow you to overpay by 10% per year and some may not allow you to make overpayments at all without being subject to an ERC ( Early Repayment Charge ).

If you are considering a re-mortgage and wan to know more about the options available contact one of our mortgage brokers today. We use the latest software to search through a comprehensive range of lenders and our Brokers have a wealth of experience guiding our clients to a suitable mortgage product and we never charge a fee for our services.