Mortgage @ 6.9% - advice

razorfox

Hello,

Me and my partner bought our first place last august and when we actually got the mortgage when the rates were in a bit of a yo yo session as the current state of the world hadn't exactly happened but obviously was looming. Anyway when we originally went for a quote the rate was lower but exactly when we found the right place typically the lowest rate we could find was 6.9, higher than before - sods law hmph. This is fixed for 2 years btw.
Would it be worth looking into "bailing" out and trying to get a new lower fixed deal at the moment? Obviously being pretty new to this i need to read up and learn the ins and outs of trying to exit but if anyone has got some friendly advice for us we'd much appreciate it so we can quickly weigh up and analyse our options to see if we can save a bit of dough.

Thanks in advance

Trying_to_be_good

You need to work out the maths - Early Repayment Charges, Arrangement Fees, legal fees etc, to see if a new deal is cheaper than your current one.

You could start with the 'ditch your fix' calculator at http://www.moneysavingexpert.com/mortgages/fixed-discount-mortgage-guide.

Robert_Sterling_3

razorfox wrote: »

i need to read up and learn the ins and outs of trying to exit

My advice is concentrate on the "outs"

On a more serious note if you can tell us the Early Repayment Fee that you would have to pay and the amount of your outstanding balance we might be able to tell you what rate your new mortgage would need to be at for it to be sensible to move to it.

razorfox

Well after a look my early repayment fee will be 3% of the total amount payable. We got a 194500 mortgage after our deposit which as said earlier was @ 6.9% fixed 2 years (30 year term).

daveb975

I would say it is not worth it.

The redemption penalty alone is the best part of £6k.

The interest element of your mortgage is costing you about £1.1k per month. If you move to one of the 3.99% fixed deals, this would reduce to £650 per month.

That is a £450 saving per month, and you would make this saving for say 14 months from when the new mortgage is approved until August next year. The total saving of £6,300 only just pays off the redemption penalty, but you will still be stuck with fees that will put you into a loss.

If you can pick up a cheap tracker, you may just about break even, but that would depend on rates staying where they are until next August.

HenryMungo

I would say pay the ERC and get on the lower rate, you will instantly pay a lot less each month and have the security of a long fix.

HM