Pulaski

It doesn't work like that - you will have to do your own amortization calculation to work out how to pay off a 30 year loan in say 23 years. There is no such thing as a 23 year mortgage, and 20 and 25 year mortgages are rarely discussed.

But what if you can't? What if you lose your job, or get sick and can't work? What if the mortgage market implodes like it did in 2008-2010? You will be utterly shafted paying the floating rate.

LeavingLondon

That's why I love this forum! It gives me food for thought! So i discussed with my lender upping my principal. He gave me a quote that will take me 27.75 years to pay off (which is where i'm at now). Does that not sound right? So it's essentially a 30 year term that'll take me 27.75 years to pay off.

LeavingLondon

Very true. This is my main worry. That said, if we lose our jobs, we won't be able to pay our mortgage either way :-( Maybe it is too much of a risk.

Pulaski

It's not quite that bad as there are many scenarios where you could continue to pay the mortgage you already have, but not refinance to a new mortgage, such as if your credit score gets trashed, your income falls, the mortgage business implodes, etc. In the worst case scenario you could take in a lodger, or rent the whole home despite not being able to refi a mortgage.

mrken30

If you plan to stay where you are, the general advice is to take out a 30 year fixed mortgage.
Rates are almost at historic lows and unlikely to go lower.
You can overpay on your monthly mortgage payments which will pay off the loan more quickly.
If you lose your job you can pay the lower, original payments.

BigK

I'm confused as to what you are trying to achieve with your broker. Just make a higher payment if/when you can, or the original payment thats due. If you are comfortable making larger payments permanently, just re-fi to a shorter term (15, 20 years) loan.

Pulaski

I suspect that their broker is confused too. ..... "Crazy Brit!"

bewildering

I do not understand why anyone would pay more earlier with a 30 year fixed?

The payment stays the same for 30 years but inflation gradually reduces the payment. Even with 2% inflation, your money is worth much more today than in 20 years than today.

$2000 in 1997 buys much more than $2000 in 2017.
my inflation calculator tells me that
$2000 in 1997 = $3100 in 2017

mrken30

The reason normally is because the interest rate is quite often a lot higher than the inflation rate. However, the difference is not that great at the moment.

tom169

Financial independence from bank payments.

Pulaski

Because "investing" surplus cash at say 4% is a massively better return than you can get on any deposit account.

Some people also want their mortgage paid off before they retire, or before their children go to college.

There are a number of sensible reasons to pay down your mortgage.

LeavingLondon

Haha. I guess I’m trying to see if I can get a better rate than I got originally and therefore lower my monthly payments without resetting the clock! I agree that a 5 or 7 year ARM is risky and I’ve decided to stay away from them so now seeing what other options are on the table.

Pulaski

Top of my list would be either a 15 year mortgage, or an equity line of credit (which is typically a second mortgage) without a primary mortgage - then you can pay what you want, pay more, pay less (so long as you pay the minimum, which is probably just the interest), even draw some back out again. The terms vary a bit, and I think if you haven't paid it off after 15 years, whatever remains outstanding will turn into a repayment mortgage. Not all states allow equity lines of credit - I know Texas is one such state.