Mortgage Term Poll

Jjjjjjjjbarry

Hello - have finally found a house after many years waiting for the right one and now trying to decide which mortgage to get. I have a decent deposit as I've been patiently waiting and saving for a house that suited me.

Should I go for the longest term 25-30 years and relax with a very affordable mortgage and enjoy life and overpay it with lump sums if and when I can and still have disposable income?

Should I go for a short to medium term which I can comfortably afford right now as long as I stay in my current stressful job - but will be worried how I'll cope if anything happens but also will be mortgage free in either 10 or 15 years?

Should I go for the long term option but set myself the target of repaying at the short term rate as I'm good with money and will have the option to "miss" an overpayment if I need to prioritise money elsewhere?

Please complete my poll! I realise this is completely a personal choice with positives and negatives but just looking for some random info for inspitation. If you've made a choice and regretted it, I'd love to hear your advice!
thanks

macsauce

Your mortgage is the cheapest loan you will ever get. Rather than paying it back early you could put the money that you would be overpaying into an index fund which could return you an average of 6% or 7% over a 30 year period. Even after tax you would be better off in the long run doing that.

macsauce

Or put it in a PRSA!

Wesser

whats the difference between option 1 and option 3

Jjjjjjjjbarry

Wesser wrote: »

whats the difference between option 1 and option 3

They are similar enough but I guess option 1 is enjoy life and if I come into a bit of cash, try and overpay but not really a main priority. I'll enjoy first, overpay later.

Option 3 is try and overpay as quickly as possible and be careful with money. But has the option to just pay my normal rate if needed. I'll overpay first, enjoy later.

They are similar choices but what happens after is what differs I guess and can change as needed.

Jjjjjjjjbarry

Great feedback on this already. I don't actually have a pension so possibly I should take the long terms mortgage with low payments and then put as much into a pension fund as a I can so that when I'm retirement age I'll have the house paid for and a decent pension. As opposed to fretting over repaying the mortgage and then later in life having the house paid for but little income.

It's an interesting way of looking at it that I hadn't even considered.....

macsauce

Jjjjjjjjbarry wrote: »

Great feedback on this already. I don't actually have a pension so possibly I should take the long terms mortgage with low payments and then put as much into a pension fund as a I can so that when I'm retirement age I'll have the house paid for and a decent pension. As opposed to fretting over repaying the mortgage and then later in life having the house paid for but little income.

It's an interesting way of looking at it that I hadn't even considered.....

This is by far the most tax efficient thing you can do. If you do decide to move jobs at a later date and you take a salary cut you can always review the level of contributions you make.

hmmm

Longer term gives you the most flexibility, and as macsauce says a mortgage is the cheapest loan you will ever have. Option 1 doesn't have to mean spending everything, it might mean building up a cash reserve, it might mean putting more money into your pension. The longer term allows you to speed up repayments if you'd like to get it paid off faster.

hoganj

I have been down this road many times, so I know your decision very well.
Choose a long term loan.
Here's why:
A. Lower stress, less outgoing commitment each month
B. With most mortgages you can overpay a certain amount each year (in my experience 10% of total loan)
C. You can set up a regular overpayment which you are not commited to
D. If you have a short mortgage it will be bad if you start missing payments or cannot afford the full amount each month

s7ryf3925pivug

I paid off a lot of mine, and will pay the rest over 10 years at fixed rate, affordable repayments, not depending on high income. This is a low stress strategy, I know I won't have trouble repaying it, I don't need to worry about interest rates, I have money in the bank. Doesn't maximize financial returns but instead minimizes risk.

Mad_maxx

macsauce wrote: »

Your mortgage is the cheapest loan you will ever get. Rather than paying it back early you could put the money that you would be overpaying into an index fund which could return you an average of 6% or 7% over a 30 year period. Even after tax you would be better off in the long run doing that.

Alas, index funds here receive extremely draconian tax treatment

Jjjjjjjjbarry

Thanks for all the advice. Have applied for the long term option. I'll pay off extra when I have some good savings built up again but life is for living now and not in the future so for my situation, I feel the best option is low pressure and more disposable income.