Avoiding early repayment charges

Thrugelmir

sportball wrote: »

I have a 50% LTV so that is not an issue. I also have an interest only mortgage and am paying approx £300 into a FTSE tracker ISA. I cannot afford to overpay at the moment unfortunately.

Then the question surely is will the ISA net a return higher than your mortgage?

So paying down the mortgage or speculating on the FTSE is a choice you do have.

ginvzt

sportball wrote: »

Hi guys,

I have recently been reviewing my finances and obviously my biggest outlay is my mortgage. I stupidly agreed to a 6.29% 5yr fixed rate in 2008. With current offers at more like 3% I could save approx £300 per month by switching.

Can you direct me to who is offering 5 year fixed mortgage for 3%?

northerner999

Overpay by what you are allowed, stick any extra in the best savings accounts you can (may as well go for a fix until the end of your fixed rate to get better interest), if you think your current income level is secure.

I don't think a five-year fix was stupid. It gave you security, meant you could plan a budget and if exchange rates went up then you'd think you were a genius. I have a fixed rate above market rates, I don't regret it at all - cost me more over the past two years but allowed me to progress on a personal level (I've been earning more than double the salary of my last job while working on an exciting project abroad - worth far more than saving 1.5per cent on my mortgage and having to constanlty check my bank accounts in the UK and never be sure when I need to send money back).

jonmp

Like Thrugelmir said - unless your rate of return on the tracker exceeds the interest on your debt then put the money to the debt. I would even close the tracker to do it. I doubt any financial advisor would agree but then they make a living out of getting you to buy financial products. (Apologies dunstonh - you always seem to say sensible things).

Why people think a mortgage is different to any other sort of debt is inexplicable. I don't even think paying into a pension makes sense unless you have to in order to get employer contributions.

Ok, it is cheap debt but that's only because if you don't pay they can kick you out of your home/property investment and sell it.

jonmp

Take the tax break for pension payments into account - but remember you keep on paying interest on debt over and over again.

jonmp

Tell me if I'm talking dodo here but £100 at 6.29% means paying £31.45 over 5 yrs.

So if you pay off £100 this year you save £31.45 at the end of the five years and if you pay off another £100 next year you save an additional £6.29 per year.

If the mortgage only had 5 yrs to run you would save £94.35 by the end if you paid off £100 per year. If it was 10 years you would save £345.95.

If you paid into a pension your £100 would be worth £125. This would increase after charges at say 2% (?). So £2.50 the first year. £38.01 over 5 yrs.

So at 2% I was wrong? What is the right figure? Should anybody read my posts?

:rotfl: