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Mortgage: Lower payment or shorter term

  • 09-03-2021 4:01pm
    #1
    PCros
    Registered Users, Registered Users 2 Posts: 2,077 ✭✭✭


    So I am in the process of switching mortgages and I have been aiming for lower payments all along. The contact at the bank has suggested shortening the term by 3 years but paying a bit more.

    It has intrigued me but which would be deemed better?

    Currently 36 years old with no loans and 200k left on the mortgage.


Comments

  • #2
    phormium
    Registered Users, Registered Users 2 Posts: 3,345 ✭✭✭phormium


    I would always be for taking the longest term available and paying extra if you have it, if you paid the payments expected for a 20yr loan even if the term set up was 30 yrs then it would finish in 20. It gives you more scope if you need to reduce what you are paying for any reason back to the required.

    That said 3 yrs is kind of neither here not there, it can't be making much of a difference and unless it's to tie in with an existing insurance policy or something I couldn't see any logic behind it. All things being equal go for the longer term and just pay the extra if you have it but as said on a 3 yr difference it can't be very significant.


  • #3
    Green Mile
    Registered Users, Registered Users 2 Posts: 498 ✭✭Green Mile


    For me, I’d enjoy the lower payments each month. Enjoy life with the extra few bob and top up your pension.

    There are pros and cons for both. For me, paying more to shorten the term will save you on interest, but that’s about 3% to 4%. If you put extra money into your pension, you’ll literally save 40% on tax.


  • #4
    PCros
    Registered Users, Registered Users 2 Posts: 2,077 ✭✭✭PCros


    Thanks for the replies.

    Makes sense to have a longer term and pay off more when I can.

    However being a fixed rate mortgage, do banks tend to allow overpayment on fixed rates? I've heard up to 10% or so with no fee.


  • #5
    namloc1980
    Registered Users, Registered Users 2 Posts: 18,315 ✭✭✭✭namloc1980


    PCros wrote: »
    Thanks for the replies.

    Makes sense to have a longer term and pay off more when I can.

    However being a fixed rate mortgage, do banks tend to allow overpayment on fixed rates? I've heard up to 10% or so with no fee.

    It depends. Some banks will charge a breakage fee each time you overpay on a fixed rate - others allow a certain amount to be overpaid on fixed rates after which the breakage fee applies. It really depends on the bank and the fixed rate structure you are on.


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