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  • FIRST POST
    • clairebeth
    • By clairebeth 10th Feb 17, 8:15 PM
    • 75Posts
    • 20Thanks
    clairebeth
    Ditching our Fix
    • #1
    • 10th Feb 17, 8:15 PM
    Ditching our Fix 10th Feb 17 at 8:15 PM
    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!
Page 1
    • glosoli
    • By glosoli 10th Feb 17, 8:50 PM
    • 411 Posts
    • 238 Thanks
    glosoli
    • #2
    • 10th Feb 17, 8:50 PM
    • #2
    • 10th Feb 17, 8:50 PM
    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!
    • clairebeth
    • By clairebeth 10th Feb 17, 8:56 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    • #3
    • 10th Feb 17, 8:56 PM
    • #3
    • 10th Feb 17, 8:56 PM
    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!
    • glosoli
    • By glosoli 10th Feb 17, 8:57 PM
    • 411 Posts
    • 238 Thanks
    glosoli
    • #4
    • 10th Feb 17, 8:57 PM
    • #4
    • 10th Feb 17, 8:57 PM
    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.
    • minimike2
    • By minimike2 10th Feb 17, 9:07 PM
    • 1,864 Posts
    • 1,367 Thanks
    minimike2
    • #5
    • 10th Feb 17, 9:07 PM
    • #5
    • 10th Feb 17, 9:07 PM
    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.
    Originally posted by glosoli
    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.
    I am a mortgage industry professional. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice
    • clairebeth
    • By clairebeth 10th Feb 17, 9:26 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    • #6
    • 10th Feb 17, 9:26 PM
    • #6
    • 10th Feb 17, 9:26 PM
    Thanks! What's 'execution only'?
    • Thrugelmir
    • By Thrugelmir 10th Feb 17, 9:48 PM
    • 53,442 Posts
    • 46,115 Thanks
    Thrugelmir
    • #7
    • 10th Feb 17, 9:48 PM
    • #7
    • 10th Feb 17, 9:48 PM
    Remember to factor in all the other costs to your calculation. Mortgage exit, valuation, legal etc.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • clairebeth
    • By clairebeth 10th Feb 17, 9:56 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    • #8
    • 10th Feb 17, 9:56 PM
    • #8
    • 10th Feb 17, 9:56 PM
    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!
    • minimike2
    • By minimike2 10th Feb 17, 11:01 PM
    • 1,864 Posts
    • 1,367 Thanks
    minimike2
    • #9
    • 10th Feb 17, 11:01 PM
    • #9
    • 10th Feb 17, 11:01 PM
    Thanks! What's 'execution only'?
    Originally posted by clairebeth
    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.
    I am a mortgage industry professional. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice
    • clairebeth
    • By clairebeth 10th Feb 17, 11:16 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    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!
    • getmore4less
    • By getmore4less 11th Feb 17, 6:47 AM
    • 28,467 Posts
    • 17,019 Thanks
    getmore4less
    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!
    Originally posted by clairebeth
    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
    £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)
    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.
    • clairebeth
    • By clairebeth 11th Feb 17, 10:07 AM
    • 75 Posts
    • 20 Thanks
    clairebeth
    Hi,

    Thanks so much for your calculations, and you are right, my dad emailed me to remind me of this too. I haven't accounted for the fact that simply overpaying over that period of time makes a big difference. We currently pay £915 a month plus £20 overpayment ( and I hadn't accounted for that overpayment in my calculations), and the new deal would be £1056 a month. So I've gone back and looked at the difference it would make to our current deal to simply over pay.

    Current deal, paying £1056 a month, July 2019: £150,900

    The way I added fees to the cost was simply by adding £6000 to the current balance or £4325 to the July 2017 balance so:

    Switch now, £167300 + 6000 = new balance of £173300
    Switch this July, £164575 + £4325 = new balance of £168900 ( this is based on overpaying at £1056 until that point)

    So with all payments being equal this leaves us at the 31st July 2019:

    Keep our deal: £150900

    Switch Now: £148500

    Switch July 2017 : £148375 ( this is also including an overpayment of £28 monthly to make a total monthly payment of £1056 in line with the others).

    Thanks for your help everyone! What I will do now is go and increase my overpayment standing order and watch the rates for the next few months!
    • clairebeth
    • By clairebeth 11th Feb 17, 10:18 AM
    • 75 Posts
    • 20 Thanks
    clairebeth
    Just to add, we do plan to overpay more than this, but won't be possible until I return to work in Aug/Sept. However, once we are overpaying, it will again be beneficial to be on the lower rate.

    I think we WILL wait until July so that:
    1. It's nearer the end of mat leave
    2. A better deal might come up
    3. Improve LTV ratio
    4. We may even decide to fix for longer, depending on the financial predictions at the time
    5. Lower exit fees, of course!
    • getmore4less
    • By getmore4less 11th Feb 17, 12:40 PM
    • 28,467 Posts
    • 17,019 Thanks
    getmore4less
    With bigger overpayments the saving get less being on the lower rate is not relevant to that that difference.

    What it is probably worth doing is the numbers for rates going up say 0.25% you can then make a more informed decision on waiting and if rates do go up.
    • clairebeth
    • By clairebeth 11th Feb 17, 5:38 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    Thanks, I'll do that.
    • adindas
    • By adindas 19th Apr 17, 7:46 PM
    • 3,089 Posts
    • 1,450 Thanks
    adindas
    I wonder is there any online calculator for this for easy comparison ?? Links will be very much appreciated ...
    • clairebeth
    • By clairebeth 19th Apr 17, 7:51 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    There is a 'ditch the fix' calculator on this site in the mortgage calculator section. There is also an excel spreadsheet. I will find the link.
    • clairebeth
    • By clairebeth 19th Apr 17, 7:52 PM
    • 75 Posts
    • 20 Thanks
    clairebeth
    http://locostfireblade.co.uk/spreadsheet/Index.html
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