Pay the ERC?

chambta

Got a £95000 interest only mortgage that I presently overpay on.

It's a staff deal at 5.39% fixed for 5 years and I'm still in year one of it.

ERCs I believe are 3%. I have the cash to pay that if needs be as equivalent deals are now 3.29%ish and likely to drop lower.

As the 'official' rate of interest has dropped in relation to benefits in kind would it still be worth my while to come out of it?

I make it that in 5 years time making the payments I do now would see myself with a lower balance than if it stay as I am.

pixiepie99

chambta wrote: »

Got a £95000 interest only mortgage that I presently overpay on.

It's a staff deal at 5.39% fixed for 5 years and I'm still in year one of it.

ERCs I believe are 3%. I have the cash to pay that if needs be as equivalent deals are now 3.29%ish and likely to drop lower.

As the 'official' rate of interest has dropped in relation to benefits in kind would it still be worth my while to come out of it?

I make it that in 5 years time making the payments I do now would see myself with a lower balance than if it stay as I am.

If you can get a fixed deal for 5 years that is 3.29% then it might be worth it but I haven't heard of any deals that low (not that I'm an expert in these matters!).

If you were to switch onto the SVR remember that it is likely to go up over the next 5 years and could end up higher than your current fix.

Maybe first you should go see if you can really get this 3.29% deal and then make the calculations to see if you save by switching and paying the ERC. Remember, you may need to include other fees for switching on top of the ERC like a mortgage fee and valuation.

chambta

The 3.29% is an staff deal so not available to the general public. It may even drop lower. There would be no fee to take this out other than paying the ERC on my existing staff deal.

I'm only considering if I can fix it for the next 5 years.

feisty1

why are you not taking advice from the advisers at work

dimbo61

Your current deal on £95k at 5.39% is costing you £426.71 a month
3% of £95k is £2850 so adding that on = £97850
£97850 at 3.29% would cost you £268.27 a month
Now £426.71- £268.27 = £158.44 X 60 months = £9506.40
Take the extra £2850 off that and you would save £6656.40 over 5 years
This is only if you get a 5 year fix at 3.29% so well worth paying the ERC and taking the new deal.
Overpaying the £158.44 each month would reduce your mortgage debt even more.
This is a rough calculation and only for information not advice !! GOOD LUCK

chambta

feisty1 wrote: »

why are you not taking advice from the advisers at work

It's the implications of the benefit in kind that I struggle to factor in. I was being taxed on the 5.39% before the official rate of interest changed. Not sure how much I will be taxed on a new deal to work out overall cost......