pay more or save?

niftynew

Hi all

Ive been reading a lot about whether or not to come out of my fixed mortgage deal and pay the penalty, this is my current situation:

Mortgage i owe is approx 60k and i pay £546 pm and have 13 years left
Mortgage is fixed for till late 2013 on a 6.29%
to come out of the deal i would have a penalty of 5% (3k)?

ok this is how i see it, please correct me if im wrong.

i see plenty of deals which are about 4% fixed and they have a fee of £999 (ish)
so for me to change deals it will cost me £4000.

so i have 36 months left on my mortgage, if i did change i would have to save at the very least £111 per month
now as far as i see the deals at 4% ish for a mortgage of £60k would cost me £490PM saving me £56,,,,,,but costing me £57 pm??

ok, so if i were to chuck my savings of about 15k into my mortgage, get a better deal, pay off the penalty fee the mortgage would cost me approx £400 pm, saving me £146 from my current deal,,,,,meaning i would be £35 pm better off,,,but at the same time losing my £15k savings which earns me approx £30pm in interest

so to lose my my emergancy funds (savings) i only gain £5 per month!!

am i missing something here????

cheers
Nifty

Joe_Bloggs

As you have analysed the figures it looks like you would be jumping out of the frying pan and into the fire. Perhaps you should wait until after the next general election. Who knows what the financial situation will be in a few months time.
In fact if you do nothing then you will at least know what your mortgage payments will be. You may need your saving reserves to cope with an uncertain future.
J_B (Doom Monger No. 284)

taktikback

sums look wrong to me. The interest only element of your mortgage would reduce from 314 to 200 per month by my reckoning. It depends whether you go interest only or repayment. If you can get more than 4% on your savings then it's worth going interest only - but that has to be doubtful.

If you are in the 60% or less LTV club and have some savings you could do worse than consider an offset mortgage. I have one with FD - that way you effectively benefit from a higher return on your savings but you have access to it in an emergency

VIGILANT22

NB.....Many lenders are now not allowing interest only without proof of a repayment vehicle in place....this includes existing clients...some lenders are now inc this is in the T&C's....

Rob71

Simple back-of-a-fag-packet calculations:

If you're saving 111 pm, but it's costing you 5K, then the payback period is about 45 months or 3.75 years before you actually make a saving on your mortgage.

Why bother with all of the hassle with valuations and solicitors fees? Stay put and overpay if possible, and when it comes to change deals then sling some of your savings at the balance.

Looks like you're making about 2.5% interest on your savings - can you lock some of it away to get a better rate?

niftynew

Thank you for the replys,
I could lock my money away, but i do like the idea of being able to get it asap if needed,

Im thinking of upgrading soon so maybe the savings would be good to help get a bigger mortgage when needed?

Over payments are allowed at max £999 per month, but im sure i read its March yearly they calculate the interest, means i could only chuck £2k at it now for the balance to drop slightly for the review period, now these are the calculation i dont understand.:cool:

Rob71 wrote: »

Simple back-of-a-fag-packet calculations:

If you're saving 111 pm, but it's costing you 5K, then the payback period is about 45 months or 3.75 years before you actually make a saving on your mortgage.

Why bother with all of the hassle with valuations and solicitors fees? Stay put and overpay if possible, and when it comes to change deals then sling some of your savings at the balance.

Looks like you're making about 2.5% interest on your savings - can you lock some of it away to get a better rate?