Early Remortgaging - is it worth it?

dovester

I'm after some advice about my mortgage and if there's anything I can do to ease my repayments.

I'm in my 6th month of a five year fixed mortgage at a rate of 7.9% over 35 years and my repayments are currently £960 a month. I've looked around and there's lots of much cheaper deals around but obviously there is a early repayment charge (3%).

My mortgage provider lets you take 6 month payment holidays - are you able to take these payment holidays then use the money to pay the fees of an ERC? Switching could save me up to £400 a month, so in the long run this seems like a sensible option. What do you think? Thanks

Cannon_Fodder

Rates have not improved that much in 6 months. There are always attractive rates being advertised, that doesn't mean you will now qualify for one of those deals.

There will be reasons for the rate you are on; credit history, Loan To Value, high salary multiple, etc. Plus choosing a 5yr Fix was for a reason. Have those reasons gone away?

Taking payment holidays is not to be done lightly, as it will add the debt to the mortgage, rack up cumulative interest and prolong the term or increase the monthly payments. Unlikely a lender will allow a 6 month holiday so soon after taking it out, anyway.

£960 a month at 7.9% over 35 years, would indicated you borrowed somewhere around £135k? 3% ERC = £4050. Its going to take ten months of that £400 saving just to make up for the ERC. Then some more months to save the fees involved in remortgaging.

And as you seem to think you can get a deal around 3% less, that must be a short-term deal, say 2yr Fix, or a Tracker, because 5yr Fixes have not fallen anywhere near that much, on similar terms - i.e. LTV/deposit, credit history etc.

In which case you will only benefit for perhaps the second year of a two year deal, then you will be remortgaging again = more fees, and who knows what rate when the BoE Base Rate has gone up again. There was a reason you opted for a 5yr Fix.

Bad idea, imo. Some element of it will not materialise. The main one being;

There were deals a lot cheaper than 7.9%, six months ago, why did you not get one then?

I don't think the answer will have gone away.

dimbo61

Dont know the reasons why you got a rather poor 5 year fix at 7.9% but I guess its something to do with a poor credit history or little deposit.
You have a long term fix and if you can overpay over the next 4 1/2 years and make sure you save and not spend to improve your credit score
Good Luck