MFW - Advise on mortgage please

marmalade555

Hello this is my first post even though I have been reading the MFW for ages now

Me and my partner bought our first house in April 2007. Its lovely, we are both really keen to get rid of our mortgage asap so then we can spend our money on travelling and hopefully rent our house out!

The house cost 131K but we laid down 20K deposit. So we had a mortgage of 111K. we are on a stepped fixed which expires next feb. It has just gone up to 5.79 (I think our repayments are about 580 a month). We have been paying off the extra 10% each year so now the mortagage is down to around 87K and we also have 25k of savings to pay off in a lump sum once we come out of our deal. So we will only have a 62k mortgage...... but getting to the point...... should we buy out of our fixed because it is at such a high rate. I think there would be a 1% fine of the 87k

any advice welcome

Jonbvn

TBH I do not see any saving outweighing the ERC. Somebody correct me?

dimbo61

You need to read the terms & conditions of your mortgage contract/offer very carefully !
It might well be 1% of the whole amount borrowed
Then you need to see what else is available and TRY ! to compare
Do you want a long term fixed rate deal and what overpayments does that deal allow ?
Most 5/10 fixed rate deals are 4.5/4.99% so is it worth paying the ERC and all the other charges £995 arrangement fee, solictors,survey,chaps,ETC to move lenders.
Looking at tracker deals is even more difficult because one or two rate rises could wipe out any savings.
I would carry on overpaying the 10% each year and save into ISA,s & regular savers then next feb look at fixed offset mortgages 5 years ( to repay your mortgage !!! ) GOOD LUCK

marmalade555

thank you for your advise I have been looking into this for couple of months now but the figures keep confusing me. I will I will all mortgage company and try to get some exact figures - I was thinkin they might waver the the application fee for a new fixed- worth a try?


current lender has these deals on offer

http://www.cheltglos.co.uk/mortgages/existing-customers/switch-to-a-new-mortgage/

marmalade555

although I wouldnt want to fix for 10 years I think - fingers crossed we will pay it off before then!

ailuro2

also take into account due to recent downturn in house prices your LTV rate might be a bit higher, even taking into account your overpayments.

I'd wait till things settle down a bit and see what deals are on offer then, a few months down the road - it is thought the Bank of England will reduce mortgage rates again this week - that may have a knock on effect, but after this, not many think the rate will drop again - so the markets should settle and you may get a better deal if you hang fire for now.

dimbo61

Contact your lender and ask if you can reduce the term and what it costs !
Then if its only say £50 reduce the term by half and use some of your savings to pay the extra each month and also make the 10% overpayment allowed each year/month.
Wait until next feb and see where the mortgage market is and how much you have paid off and saved
Still think a 5 year offset fix would be a good idea
Only my opinion !! GOOD LUCK

dimbo61

Are your savings earning 5.79% after tax at the moment ?
If not try above post and see what lender will allow
Could even reduce term to 5 years !!!

marmalade555

i think we are earning about 2.5 percent on our savings at the moment - its in isas but they keep dropping. Thinking about if we dont buy out we prob should move our savings somewhere else. Have been told by lender to call back in feb to get a most accurate figure of ERC.

dimbo61

Savings rates poor everywhere at moment
Like I said contact lender and ask can you shortern term and then payments will go up big style and use savings to pay extra each month plus 10% overpayment.

marmalade555

oh I see I didnt understand before but that makes sense. I will do that tomorrow! thankyou