Ditching our Fix
clairebeth
Posts: 299 Forumite
Hi, I have done my maths and it does look like ditching our fixed rate will be beneficial, despite hefty fees, but just want to go over it with you wise people and see if you had any advice for us, perhaps the are things that I am missing?
Current sitch:
167,300 owing on a five year fix @ 3.69% with YBS which will end 31st July 2019.
Exit fees will be £5000. (Or 3,325 if we wait until the 31st July this year to switch).
Thinking of switching to:
HSBC fixed @ 1.24% which will end 30th June 2019. Fees £999.
I would reduce the term of the mortgage from currently 23 years to 15 years and the new payment would be about £100 more than the current payment, which is still perfectly affordable to us. When I go back to work after maternity leave will will be in a position to resume overpayments as well, and this will presumably reduce the capital more quickly on a lower rate.
All the maths looks like ditching the fix is the right thing to do. The MSE calculator says so, and locoblade's excel spreadsheet indicates that, even when we add the £6000 fees to the new mortgage.
According to the spreadsheet, on the 31st of July 2019, (approx the end date for both rates), we will have outstanding:
£156,200 and 20 years remaining if we stay on current deal
£148,400 and 12 years 8 months remaining if we switch (this includes adding fees to the new mortgage)
This does not include any potential overpayments.
Is it a no brainer? It certainly looks like it on paper, I just want to check with someone. Is there anything I've not factored in? Have you ever paid 5000 in exit fees and lived to regret it?
Damn those fees!
Thanks in advance!
Current sitch:
167,300 owing on a five year fix @ 3.69% with YBS which will end 31st July 2019.
Exit fees will be £5000. (Or 3,325 if we wait until the 31st July this year to switch).
Thinking of switching to:
HSBC fixed @ 1.24% which will end 30th June 2019. Fees £999.
I would reduce the term of the mortgage from currently 23 years to 15 years and the new payment would be about £100 more than the current payment, which is still perfectly affordable to us. When I go back to work after maternity leave will will be in a position to resume overpayments as well, and this will presumably reduce the capital more quickly on a lower rate.
All the maths looks like ditching the fix is the right thing to do. The MSE calculator says so, and locoblade's excel spreadsheet indicates that, even when we add the £6000 fees to the new mortgage.
According to the spreadsheet, on the 31st of July 2019, (approx the end date for both rates), we will have outstanding:
£156,200 and 20 years remaining if we stay on current deal
£148,400 and 12 years 8 months remaining if we switch (this includes adding fees to the new mortgage)
This does not include any potential overpayments.
Is it a no brainer? It certainly looks like it on paper, I just want to check with someone. Is there anything I've not factored in? Have you ever paid 5000 in exit fees and lived to regret it?
Damn those fees!
Thanks in advance!
0
Comments
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Some rough calculations would indicate interest paid on the existing mortgage over next two years to be £12,011, with the new mortgage having interest paid of £4,021, with an early repayment charge of £5,000, so in essence you would be around £2,990 better off, with a reduced mortgage term, and in two years time when you review again you will be able to re-fix at a lower balance, seems a no brainer to me!0
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Thanks. I think so too. Also, just had another thought - can we actually add the YBS exit fees to the HSBC Mortgage? Or do they take issue with this?
Thanks!0 -
It should be fine, when you remortgage they will want to know what the redemption figure is anyway, not strictly what the outstanding balance is.0
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It should be fine, when you remortgage they will want to know what the redemption figure is anyway, not strictly what the outstanding balance is.
Not strictly true. The payment of ERCs falls under the advice being given and so they will for sure want to know both the balance and the ERC.
Unless of course the OP applies on an execution only basis, which HSBC offer. I don't know if they still ask for a split in that situation having never done it.0 -
Thanks! What's 'execution only'?0
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Remember to factor in all the other costs to your calculation. Mortgage exit, valuation, legal etc.0
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Thanks. I've factored the £5000 exit fees plus the £999 new mortgage fees, which includes valuation. So I need to do anything legal with a solicitor etc if it's a remortgage? This is what I may be missing!0
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clairebeth wrote: »Thanks! What's 'execution only'?
It means you transact with the mortgage lender without receiving advice. It is only available online and you lose your protection you would otherwise receive from taking an advised mortgage.
If you aren't 100% sure with what you are doing, you shouldn't do it.0 -
Aha! Thanks. I'm pretty sure our current mortgage is 'execution' only now that I think of it. No, I certainly won't act until I'm 100% sure of the facts!0
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clairebeth wrote: »Hi, I have done my maths .....
Current sitch:
167,300 owing on a five year fix @ 3.69% with YBS which will end 31st July 2019.
Exit fees will be £5000. (Or 3,325 if we wait until the 31st July this year to switch).
Thinking of switching to:
HSBC fixed @ 1.24% which will end 30th June 2019. Fees £999.
I would reduce the term of the mortgage from currently 23 years to 15 years and the new payment would be about £100 more than the current payment.....
All the maths looks like ditching the fix is the right thing to do. The MSE calculator says so, and locoblade's excel spreadsheet indicates that, even when we add the £6000 fees to the new mortgage.
According to the spreadsheet, on the 31st of July 2019, (approx the end date for both rates), we will have outstanding:
£156,200 and 20 years remaining if we stay on current deal
£148,400 and 12 years 8 months remaining if we switch (this includes adding fees to the new mortgage)
This does not include any potential overpayments.
Is it a no brainer? It certainly looks like it on paper,
Damn those fees!
Thanks in advance!
Start with the base calculations.
Your base number of difference of £100 looks wrong.
£167,300 @ 3.67% 23y £900pm
£173,300 @ 1.24% 15y 1056pm
Will use £1kpm to do the comparison(if you plan to overpay that changes the numbers
2 key dates on current deal 5m and 29m
pay the £6k now after 5 months you owe
£167,300 @ 3.69% £1,000pm £164,857
£173,300 @ 1.24% £1,000pm £169,187
add fees in 5 months £4325 £169,182.
Are you sure you accounted for the fees in 5th month on the right balance?
The difference is close might need more accurate numbers based on timings as if you can only squeeze in 4 payments it might be better to wait.
Switching in 5 months you are now comparing over 2 years.
(the one month June/July will make around £300 difference so can look at that more closely if the savings are under £500)
£164,857 @ 3.69% £1000pm £152,596
£169,182 @ 1.24% £1000pm £149,141
looking at about £3450 saving.
(I have run through a couple of times I think these are about right)
your conclusion
looks like you have been using different payment to compare the deals which is not a good idea unless you account for the difference in another way.£156,200 and 20 years remaining if we stay on current deal
£148,400 and 12 years 8 months remaining if we switch (this includes adding fees to the new mortgage)0
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