30 v 35 year mortgage

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LonseaLM

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I'm looking to take out a mortgage and debating between 30 and 35 years. I'd be fixing for 5 years. From my calculations, the interest paid after the 5 years is very similar for the 30 v 35 year terms. Obviously you pay more monthly on the 30 year term but it seems to most go towards the capital.

If I took out a €250,000 I'd pay €500 extra interest in 5 years if I go 35 instead of 30. Is this correct? Seems too good tbh.

€250,000
Mortgage TermRateMonthly RepaymentTotal RepaymentsCapital RepaymentsInterest Repayments
30 Years3.7% Fixed 5 Years€1,062.40€63,744.23€19,184.65€44,559.58
35 Years3.7% Fixed 5 Years€1,150.71€69,042.45€24,994.82€44,047.63
€500,000
Mortgage TermRateMonthly RepaymentTotal RepaymentsCapital RepaymentsInterest Repayments
30 Years3.7% Fixed 5 Years€2,124.81€127,488.46€38,369.29€89,119.16
35 Years3.7% Fixed 5 Years€1,150.71€138,084.90€49,989.63€88,095.26
 
Thanks, I suppose my idea would be to save up for the first few years when it's fixed then pay of a big chunk (depending on refixing rates).

I'm surprised the difference is so little.
 
LonseaLM said:
I'm surprised the difference is so little.
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Well, you're only repaying an extra 88 per month, so the impact on balance difference is not big in first couple of years.
After 1 year, it's 1,077 less, etc.
Back of an envelope, Interest on 1077 at 3.7% for 4.5 years is 180, then another 1000 for 3.5 years, etc
 
A few points

1)
LonseaLM said:
I suppose my idea would be to save up for the first few years when it's fixed then pay of a big chunk
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Why would you save it up? Just pay it off when you have the money. There could be an early repayment charge, but there might not be and if there were, it would be small and much less than the interest saved by paying off your mortgage.

2) In general, take out a mortgage for the longest contractual term possible.

There is nothing to stop you taking out a 35 year mortgage and repaying it over 30 years or even 20 years.

3) However, if you are very comfortable repaying it over 30 years, then take it out over 30 years so that there is no messing with overpayments.

The downside of a shorter term is that if you get into trouble meeting your repayments, and you extend the term, your mortgage is considered restructured and your credit record may be affected.

Brendan
 
The benefit of the longer term is that you have a bit more flexibility in case you can't meet the higher payments of a shorter term. On the other hand if you have the funds to pay off early there may be a penalty for doing so if interest rates fall.


Otherwise I think you are way overthinking things by working lifetime interest costs. A lot will change between now and 2053 or 2058 and just go with what suits you best right now.
 
1) Why would you save it up? Just pay it off when you have the money. There could be an early repayment charge, but there might not be and if there were, it would be small and much less than the interest saved by paying off your mortgage.
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I'd be quite risk adverse and like having a large rainy day fund, plus having cash/bonds/investments has allowed me to take advantage of investments over the years that would return a lot more than the mortgage cost.
 
1. What age are you?
2. What age will you be when the mortgage is fully paid back?
3. Is your house purchase your forever home?
4. Have you got job security?
5. Are you married?
6. How's your health?

If you want to answer the above questions, I'll give an opinion as accurately as I can.
 
1. What age are you? 30
2. What age will you be when the mortgage is fully paid back? 65 (if I let it go to term)
3. Is your house purchase your forever home? Yes
4. Have you got job security? Yes, though will be looking to quit and do my own thing in the next year or two.
5. Are you married? No
6. How's your health? Very Good
 
LonseaLM said:
1. What age are you? 30
2. What age will you be when the mortgage is fully paid back? 65 (if I let it go to term)
3. Is your house purchase your forever home? Yes
4. Have you got job security? Yes, though will be looking to quit and do my own thing in the next year or two.
5. Are you married? No
6. How's your health? Very Good
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Go for the 30 year term which will give you more scope and more options personally and financially when you reach 60.
 
Personally I would go with the longest term possible but start overpaying from day one whenever / whatever is possible.
Leads to smaller mandatory monthly repayments and gives more fexibility in regards to cash flow.

On taking the advantage of investments - thats imho only valid for investing in your pension - investments outside of a pension vehicle are taxed too high here to make them better in regards to rewards and risk than overpaying a mortgage.
 
Go with 30 years. 35 years is madness. And aim to overpay the 30 so you give yourself more flexibility, higher equity earlier and more options if you run into problems later in life.

It's a very rare person I've met who uses extra cash to pay down mortgage who doesn't come up with 'better' uses for the money (holidays, creche, disney, , cars ....)
 
Bronte said:
Go with 30 years. 35 years is madness.
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I don't think it's madness if it's most likely going to be paid off sooner anyway. The downside in terms of higher mortgage protection life insurance premiums doesn't apply in this case. The only con that I can think of is that the borrower "forgets" the original intention to pay it off early and it runs the full 35 years and incurs the full 35 year interest costs. Which is, I guess, the point that you're making? But if they're committed to accelerating repayment then I see no real issue with taking the longest available term.
 
I would always advise the longer term and overpay, if you pay the 30 yr repayments then the 35yr mortgage term will end in 30 yrs, however it does give a little flexibility should anything happen. Added bonus in this case is there is no extra life cover cost to doing it.

Are you staying in this house forever, if not you will probably be remortgaging again at some stage and the term you take now will change again, very few people mirror an existing term exactly when going for a new mortgage.
 
I think for me the best idea is to take the 35 year mortgage. I'll overpay the max allowed 10% during the fixed term and continue saving. Then after the fixed term, i'll have a good whack saved and can reassess best case wrt interest rates etc.

I max out the pension already so there's no scope for increasing that really. I'm extremely disciplined so the wouldn't be worried about "forgetting" to pay off the mortgage early. I have standing orders to savings (both long term and rainy day) on pay day.
 
LonseaLM said:
I'll overpay the max allowed 10% during the fixed term and continue saving.
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This might not be very efficient. If there is no break fee you should pay off amounts right away rather than letting it accumulate on deposit and paying if off in instalments.

Remember there is DIRT on deposit interest but the interest saved from paying off the mortgage is DIRT-free.
 
I understand but thats over simplifying it in my mind. I value having a large rainy day fund. Not only has it saved me in the past it's also allowed me to take advantage of investment opportunities that have popped up which has put me in this fortunate position.

Plus my annualised return is around 8.5% (excluding crypto).
 
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