Is there another way?

GAILEY

Just a quick query.... We have a mortgage of around £57,500 - my OH been made redundant, and with his payment and one of my ISA's being cashed, we reckon that we could pay about £38,000 off - we have a fixed rate though, and I think we have to pay about 8% of the figure repayed if it's a lump sum - so just over £3000 for the priviledge of paying a bit of,,as opposed to penalty free overpayments of £499 per month - I've been playing with the calculator tool and it sems pretty clear that it is hands down the better option to repay the lump sum and take a hit on the penalty (which would in reality mean we were paying off £35,000) - but is there anything I am missing - it's such a big step that I want to make sure we are doing the right thing. I'm also taking into account the £150 near as dammit that we pay each month insurances to back up our repayment mortgage - which has 12 years to run, but would have less than 4 years if we plunged the lump sum in...
Does anyone have any thoughts please? Have I missed anything?? (oh...the mortgage is fixed, which is why there is the penalty - we took it as a 10 year fixed at 4.99% in 2005 - which seemed ike (and was..is) a good deal at the time

Rikki

What will your husband be doing workwise now? This option may not be possible if he has to claim benefits.

GAILEY

He's registered for JSA at the moment but will only get the contributory bit - we are resigned to the fact that he isn't going to get any income based benefits because I earn too much - as I understand it, as long as I am not claiming anything he can get his contrib based JSA for 6 months without enquiry into our finances...is that right?
Also, I have kept back one ISA should we get desperate for cash - as mine is now the only income for the mo

GAILEY

Anyone??:rolleyes:

trynsave

Why do you want to repay a huge chunk off your mortgage now?

I think overpayments are fantastic if you are in a good financial position, but who knows what the future will bring esp. if you already are in/facing a redundancy.

I don't know all your circumstances, but I think I would use the redundancy package to give me breathing space to repay monthly, perhaps overpaying slightly. If you had been able to claim benefits by 'losing' your lump sums I could see your point, but when you don't seem to have that I strugle to see why you wish to overpay.

I would also like to point out that very few lenders will take on a mtge of less than 5 yrs, so reducing it to 4 yrs and paying a huge £3k for the privilidge will probably mean that you will have to sit on your current lenders svr for the next 4 yrs. Great as some svr's are at the moment, I reckon that this will be a short lived position.

gizmo111

I would also like to point out that very few lenders will take on a mtge of less than 5 yrs, so reducing it to 4 yrs and paying a huge £3k for the privilidge will probably mean that you will have to sit on your current lenders svr for the next 4 yrs. Great as some svr's are at the moment, I reckon that this will be a short lived position.

The OP took out a fixed rate in 2005 so has 6 years left.

The redemptions seems high at 8% - who is it with. Bear in mind if you pay off in total before the 10 years then you will face another ERC at the end. Check before paying. Can you make smaller lump sum overpayments and overpay as well?

trynsave

gizmo111 wrote: »

The OP took out a fixed rate in 2005 so has 6 years left.

The OP actally said that by buying out of their fixed rate and overpaying they would reduce their term from 12yrs to less than 4 yrs! They have a 10yr fxd which would have 6 yrs left if they continued to let it run.

gizmo111

trynsave wrote: »

gizmo111 wrote: »

The OP took out a fixed rate in 2005 so has 6 years left.

The OP actally said that by buying out of their fixed rate and overpaying they would reduce their term from 12yrs to less than 4 yrs! They have a 10yr fxd which would have 6 yrs left if they continued to let it run.

Yhey didn't say they were buying out of it - they said they are on a fixed rate for 10 years from 2005 - with 12 years left from now. Paying the £38K would leave them with 4 years left as opposed to 6 years on current fixed deal and then 6 years on another deal.

GAILEY

Thanks for your replies.
Now seemed like a good time to pay off a chunk of the mortgage because with my OH being made redundant we have a lump sum (which we are unlikely bar a lotto win to get again) and we want to make the maximum use of the cash.
Saving rates are so low that they are unattractive and we calculated that by firing in the redundancy money and a couple of my ISA's we would go from a mortgage of 12 years paying £19K over the remaining term to a mortgage of 3.5 years paying less than £2K - so even with the £3K payment penalty it seems to make sense.
I hadn't thought about a further charge when I end the 10 year term early but have had the bumf out and looked and the charge seems to be based on the amount repaid early, so doesn't look to be another penalty, but will specifically check with them.
I know it seems a bit like a crash and burn option, particulary with only 1 income - but I am pretty confident I can meet the overheads etc at the moment on my income andI am a company director who has a little still in the business which I could I think use as a buffer in an emergency. Also, my company is good for a couple of years but the long term future in my area of work isn't great - so I felt that if I cleared the mortgage now (and got rid of those insurance policies I'm paying to back it up) that if times got harder in 3-4 years time and I packed up, at least we'd be mortgage free and less worried.
Does that make sense??

foreversummer

Hi

Just wondering what these insurance policies that you refer to are.

Foreversummer

GAILEY

One is insurance in case of accident, sickness and critical illness - it pays the mortgage if sick or it off completely if crit. illness - and the other is employment protection, which will hopefully pay a monthly amount after my OH is unemployed for a length of time, if he is unemp for that time