15 years or longer?

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lilliesmom

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We have our home up for sale.
We are hoping to take a mortgage of 15 years on our new purchase.
If we were to sign up for a 25/30year mortgage and then swap to a 15 in a year a two,would there be huge penilties.
In a casual meeting with the bank i said I was hoping for a15 year and the assistant said i should go with a longer term and then change it later.
We are hoping to buy an old building to refurbish so it would free up some cash?
 
lilliesmom said:
We have our home up for sale.
We are hoping to take a mortgage of 15 years on our new purchase.
If we were to sign up for a 25/30year mortgage and then swap to a 15 in a year a two,would there be huge penilties.
In a casual meeting with the bank i said I was hoping for a15 year and the assistant said i should go with a longer term and then change it later.
We are hoping to buy an old building to refurbish so it would free up some cash?
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No penalties for reducing the term once you are not on a fixed rate.

The longer the term the lower the initial repayments but it will cost you more in the long run. If you sign up for a 30 year and then wish to reduce it to 15, you will have to prove to the bank that you can afford the higher repayments over the shorter term.

www.moneybackmortgages.ie
 
Thanks Norf bank.
We can totally afford to pay over the short term,its a small enough mortgage we'd be getting,just looking at options to release cash at the start for essential renovations.
Do you happen to know what the penalties are if you were on fixed rate.We could always start with the longer term unfixed rate and then change to the shorter term fixed rate....just hope our exsisting house sells!!!!!!!
 
Each lender has their own way of calculating penalties for altering a fixed rate. If you are thinking of breaking a fixed rate then don't take it and stick to a variable would be my advice. The potential savings made on the fixed rate could be smaller than the penalty.
 
If you take a variable rather than fixed, you could nominally take it out for the longer term, but make regular overpayments (i.e. make the same payment each month that you would if you'd only taken a 15 year mortgage). That way you can pay it off in 15 years if you want, but you also have the safety net that if something changes in your life, you can drop down to the lower payment without having to go grovelling to the bank for an extended term or moratorium. Effectively, you're more in control.
 
agree with Damson..take out the longer term and make overpayments each month in case of future employment or financial changes...better still pay every two weeks instead of monthly and save a months interest each year.

Check with your lender .
 
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