Changing mortgage term

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deedee80

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Hi there,

I am looking to change my mortgage term from 35 years to 25 years. I was on to the bank today and they have asked me to put this in writing. I want to make sure that I am actually paying more off the initial loan I took out. Is there any specific wording I should use in the letter or does anyone know of a template anywhere? Any help would be greatly appreciated.

Many thanks,

Deedee
 
deedee80 said:
I want to make sure that I am actually paying more off the initial loan I took out.
Click to expand...

Hi deedee,

I'm not sure what you mean? If you decrease your term, your repayments are calculated over the new term. The new repayments will still include interest although you will be paying less interest due to the decreased term.
Just advise the lender in writing that you would like to decrease your term by ten years with effect from (specify date) and that should be sufficient.
 
Why not increase your monthly mortgage payment while keeping the existing term? You will see the "overpayment" reducing the term due to this, and it gives you the freedom to reduce your payment if your circumstances change, and not have to negotiate with the bank to increase your term if needed. A letter to the bank stating how much you now wish to pay is all that you require.

emul
 
Also, make sure to tell the bank that you want the over payment coming off the capital rather than the interest.
 
DeeDee80, I suggest you ring the bank and ask how much you would have to pay monthly to reduce the term to 25 years. Once they give you the amount word your letter like so:

Please change my monthly direct debit from €X,XXX (old payment) to €X,XXX (new payment) per month. I wish the additional €XXX to be taken from the outstanding capital amount and the term reduced accordingly.
From my telephone conversation with your office I understand that this will reduce my term by approximately 10 years.
Please reply by letter outlining the reduction in term, confirming the new payment and confirming the new clearance date for the mortgage.



 
Just one other thing to note, the bank may have to send the case to underwriting to see if the applicant can afford to reduce the term by ten years (and the extra monthly payment this will involve). If the reason that the term was originally 35 years was in order to allow the applicant to borrow the maximum amount then the lender may have an issue with the term reduction.

Otherwise the letter of instruction will suffice.
 
Thanks a million guys. I was on to the bank initially and they said I could reduce the term by 10 years and told me how much extra this would cost a month. What I was initially trying to query (yet didn't know how to put into words!) was what emul suggested. In that I would like to actually pay more off the amount that I borrowed. To be honest I don't really understand the whole process but I was on to the bank to figure out how much we had actually paid off our house in the 2 years we have had the mortgage and it was around 4k - the rest was all interest! You'll have to excuse my ignorance but I was totally shocked at this! Would like to be in a position where if we decide to move in 5 years time want to have paid a bit more off the original loan amount, if this is possible (and if this post makes any sense!)
 
You should use Karl Jeacle's calculator to figure out how much interest and capital has been paid. It's normal for the first years payments to be mostly interest.
 
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