The "Should I Ditch my Fix?" Calculator Discussion Area

MarkyMarkD

sizla wrote: »

My elderly parents have a £60K mortgage on a property costing £260K. They are with Abbey for a 5 year term (2 years fixed at 5.09% before reverting to SVR). Redemption fee is £2500. Monthly capital repayment is £1150

Barclays are tempting them with this same offer. "Swicth to us and pay the redemption fee and we could possibly save you money blah blah blah"

the calculator says seek a mortgate rate of 2.25% or lower. Although the banks are offering nowhere near these level of interest rate deals.

Any advice would be greatly welcome

Sorry sizla, I can see that nobody has answered your question.

My "fag packet" calculator says that based on an ERC of 4.17% (and I should point out that this sounds excessive, even if it includes a fixed MEAF element of say £250 on top of an ERC of say 3%) you need to save 2.08% a year for 2 years - plus the costs of remortgaging if they are not included. That would mean a rate of c.3%: the same as the 3.01% the calculator gives if you say not to add the ERC and that remortgaging costs are covered.

Your 2.25% is based on adding the ERC and remortgaging costs NOT being covered - the more likely scenario for most people - which means that it is unlikely to be worth ditching.

Another warning about the calculator which I've only just noticed - it assumes interest only. That means that it exaggerates the benefits of ditching and switching - slightly for those on long mortgage terms, HUGELY for those on short mortgage terms. In the example of sizla, with a 5 year term, the break-even rate is even lower than the 2.25% the calculator provides, because that 2.25% calculation assumes that the balance will remain at £60k throughout the 2 year comparison period. In reality it will reduce very significantly because it's so near to redemption anyway.

Point for MSE Dan/Martin the calculator really should discriminate between IO/Repayment and therefore ask for the total mortgage term, or this is another warning which needs to be given. At present, it is biased towards ditching and switching.

theashes

I messaged Nationwide today asking how much I'd pay to move from my fixed rate to a tracker, and got a very prompt reply 5 minutes later:

"With effect from Wednesday 21 January 2009 Nationwide introduced some changes to our mortgage policies.
You'll be unable to come out of your fixed mortgage early if you have more than three months remaining. However, if you are moving home you are able to come out of your fixed mortgage early and take out a new mortgage product. If you have less than three months remaining, you are able to come out of your fixed mortgage without paying an early repayment charge and switch to a new mortgage.
With regard to tracker products, you can switch your mortgage without paying an early repayment charge in the last three months of the term of the mortgage. If you have less than three months remaining, you can switch to another mortgage without paying an early repayment charge. However, you'll be unable to come out of a tracker mortgage and take out a new tracker mortgage.
Please note you are unable to come out of your mortgage early at any time and revert to the base mortgage rate. You can only go onto this rate once your current mortgage expires and it's not available for new business."
Can they really change my mortgage terms like this without telling me?!:mad:

dunstonh

Can they really change my mortgage terms like this without telling me?!:mad:

THey are not changing your mortgage terms. You are trying to change them.

You bought a mortgage deal and they are telling you that you either honour it with them or if you dont want to you can take your mortgage elsewhere.

MarkyMarkD

All Nationwide have done is to stop letting people off the terms of their mortgages which required them to stick to the fixed rate for the agreed term.

No mortgage lender is OBLIGED to allow you to exit a fixed rate, and switch to a variable rate. They don't HAVE to allow you a product switch at any time at all.

jsek

HI i have a 5.29% fixed rate at present. I have 4 years left on it and would incur a 4% penalty if i left. Is it worth my while swapping to another lender??????? I am no good at working out these things so would appreciate some advice.
Thanks

the_root_of_all_evil

hi

my mortgage is 130000 fixed @ 5.99% 29 months left and my ERC is 4000 :beer:

can i sell my house to my brother and then back again, and just end up paying solicitors fees or can i not sell the house while on a fixed rate mortgage?

if i sold the house to joe public would i still have to pay the ERC.

any help please

pineapple123

You can sell your house to anyone however you would need to get at least the amount to cover your existing morgage to pay that off, however there may be a clause that you have to pay a redemption if amount is paid early.
then you would need to find another lender who is prepared to give you a morgage with a good deal as your existing morgage broker probably will not take kind to puchasing back your property to evade paying fees to them.
personally I think its alot of hassle and abit risky.

Interest rates also go up, if you did change to a tracker/variable these rates could eventually exceed your fixed rate and also occur charges if wanting to change back or pay off early.

MarkyMarkD

I don't understand why on earth "the root of all evil" thinks that redeeming the mortgage due to selling the property will be exempt from the ERC - it won't.

And I don't understand pineapple's answer either.

The simple answer is that "the root of all evil" is proposing a pointless pair of transactions which will trigger the ERC and require obtaining a new mortgage which is unlikely to be significantly cheaper when all the costs of 2 sets of legal fees and one set of mortgage application costs is considered.

MarkyMarkD

I don't understand why on earth "the root of all evil" thinks that redeeming the mortgage due to selling the property will be exempt from the ERC - it won't.

And I don't understand pineapple's answer either.

The simple answer is that "the root of all evil" is proposing a pointless pair of transactions which will trigger the ERC and require obtaining a new mortgage which is unlikely to be significantly cheaper when all the costs of 2 sets of legal fees and one set of mortgage application costs is considered.

ixwood

MarkyMarkD wrote: »

All Nationwide have done is to stop letting people off the terms of their mortgages which required them to stick to the fixed rate for the agreed term.

No mortgage lender is OBLIGED to allow you to exit a fixed rate, and switch to a variable rate. They don't HAVE to allow you a product switch at any time at all.

I don't understand. Surely you can switch any time you want, but you'll obviously be charged the exit fee? Else, what's the point of it?