Worth paying early exit fee?

Gonchong

Hi, currently on a 4.99% fixed rate with Northern Rock. I have 11 months left on this current deal. Redemption penalty of £1100 to leave early. Approx 60k left, £500 per month, 14years 10month remain.

Will it be better for me to leave early, to get a deal on a lower rate, thus, potentially paying my early exit fee?

blued

You'd need to find a mortgage at about 2% to make it worth paying that redemption penalty. Even then your saving is going to be small and this is assuming the new deal you find has no fees!

So I'd say no. 4.99% is a good rate and you wont find one much lower than this if you're planning to fix again.

staceydaisy

what about me do you think its worth it for me i currently owe 100k id have 2k in fees if i was to pull out but i am currently paying 6.94

dimbo61

How long have you got left on the 6.94% rate ?

staceydaisy

i have till july 2010

daveb975

You have 16 months left paying 6.94% on £100k. That is going to cost you about £9,200 in interest. Remortgaging to 2.89% (FD) would reduce this to £3.8k, so you would make a gross saving of £5.4k.

From this, you would need to take the FD fees (application and valuation is about £1k) as well as your £2k redemption penalty.

So, you would stand to save about £3k by July 2010 if you did this, but you would be on a tracker rate, so any increases in the base rate could wipe some/all of the savings out.

Moving to a fixed rate at say, 4.49% would be less beneficial as your gross saving would reduce to £3.2k, meaning that you would only just about break-even after paying the fees and redemption penalty.