Should I pay £6000 to get out of my 5.99% Mortgage?

missycapper

Sorry should have worded the title slightly differently! Should I take out a loan...
Do you think it is worth my while taking out a loan to pay an exit fee of £6000 to get out of my fixed rate (5.99%) mortgage when I still have 4 years to go on this rate? I still have 24 years left on my mortgage, so dropping down to even 4% makes a big difference (about £200) to me monthly...I guess paying pack the £6000 loan might be cheaper monthly than the difference I would see in mortgage payments...?

maninthestreet

You haven't told us the outstanding amount on your mortgage, but if 1.99% reduction in your interest rate will save you £200 a month, then you must have a £120,000 mortage. It will take you 30 months at £200 per month to cancel out the £6000 exit fee. Any new mortgage may have up-front payments/charges that would also have to be taken into consideration.

missycapper

Mmm, yeah. Didn't think about the charges. My mortgage currently has £124k outstanding. It is killing me seeing the mortgage rates so much lower than I am paying!
:eek:

dimbo61

You also have to take into account the interest charged on the £6000 if its a seperate loan or added onto the mortgage.
What deals can you get that offer 4% for the next 4 years ????
5.99% is not that bad and you have security for the next 4 years and rates will go up
Most 3/5 year fixed rate deals are 4.69/4.99% even now plus costs to move.
If you have £6000 overpay your existing mortgage as this will save you 5.99% on every penny you can overpay.

missycapper

I haven't actually seen any offers at 4% but have been informed they will soon exist. 4.25% has been spotted by another maneysaving fan.
It may be worth it if I get a variable rate though don't you think? I'm not really sure how low they are at the moment or what the minimum term for them is (as I have always gone fixed before). I would have to borrow the whole £6000...

MarkyMarkD

It would frankly be very silly to pay £6,000 to move to a variable rate which saves you enough money NOW to be worthwhile, but which probably won't over the whole 4 years.

If you can get a fixed rate, over the same fixed term, which is better value than there's obviously no risk attached to switching. But otherwise, you really ought to stay where you are.

beecher

missycapper wrote: »

Mmm, yeah. Didn't think about the charges. My mortgage currently has £124k outstanding. It is killing me seeing the mortgage rates so much lower than I am paying!
:eek:

They're not that much lower than what you're paying. What's your LTV - if it is above 60% then you don't have a great chance of getting a 4% if they do become available.

natman

I agree with the above posts - it does seem a little weird to take out a loan of 6k - whats the interest on this, as you will have to pay more than £6000 back, a common loan interest rate at present is - about 8.8% over 5 years paying £7400 back.

Also I have just taken out a mortgage fixed rate at 5.09 for three years. Yes some banks have standard variable rates less than this at the minute, but in the next 3-5 years interest rates will creep up slightly.

Some fixed deals at the minute are 4.49%, but has an arrangement fee of £1000

So thats 1400 + 1000 fees/interest you are paying on top of a potential get out clause fee... you will have to do the sums, also if you remortgage, is your property worth what you want in a mortgage or in fact can you get a new amount comapred to your loan to value??????

Be very careful, things can seem very greener on the other side, its not until you work it out you realise.......
In addition - i beleive you took out your fixed at the time because it was a decent product and you knew what your payments would be. That still is the case, try not to get to angry that things are different now.
The rates may have gone down, but its much harder to get a mortgage now and you have to pay a premium if you want a decent rate.