Q I expect to buy a small flat, from £ 90,000 to £ 120,000 on a 15% down payment, just before my 50th birthday. I will retire at 67.
While I can comfortably afford the 17-year mortgage payments, as an extremely cautious person, I would prefer a slight reduction in the monthly outgoings of a 20-year mortgage. I like to save money and have a good amount of cash for emergencies.
I still expect to overpay my mortgage, and try to pay it back in 10-12 years by means of a small monthly contribution, the odd lump sum from the emergency excess money and a small lump sum when I turn 60, from a small private guesthouse.
With all of this in mind, what are the odds of getting a 20-year mortgage, given that I should be retiring in 17 years?
A I’m afraid I don’t know because it depends on what your retirement income will be. But what I do know is that if it’s not enough to cover your mortgage repayments once you retire, it’s highly unlikely you’ll get the long-term mortgage you want.
This is also the case even if you will have enough retirement income to cover the payments as they are now, but not enough to cover them after a lender’s “accessibility stress test” to see if you can afford the payments if the rates of interest increase.
On the plus side, if your retirement income is enough to pass the stress test, chances are you’ll be able to get a 20-year mortgage, rather than one with a 17-year term, but I can’t really understand why. would you.
Extending your mortgage for three years can mean lower monthly payments, but it also means a higher overall interest account. Since you say “you can comfortably afford the 17-year mortgage payments,” you would save money by staying true to 17.
But if you’re determined to cut down on your monthly mortgage payments, you’d better use some of your excess emergency money to increase the deposit you’ve deposited.
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