Paying mortgage off advice please

frowner

Hello,

Any words of wisdom greatly appreciated. Here is our situation:

Current mortgage with A&L is £47,000 with 12 years remaining. Current interest rate is fixed until 2014 at 3.95%. We fortunatley have the funds to pay the £47,000 off in full now but A&L will charge us an ERC of £1419 and admin fee of £295 for the priviledge. If we wait until 2014 only the admin fee will be due. We can overpay 10% every Jan and up to £500 monthly.

Is it best financially to get rid of the mortgage now?

Many thanks in advance.

originalmiscellany

Not a scientific answer (I don't have a spreadsheet open!) but it would appear to make sense to get rid of it now - at an extra cost of £1700...
I know I'd prefer to clear the mortgage and know there's nothing else to pay every month.
Plus you can then put what you would have paid in your mortgage into a savings account for future rainy days.
But that's just a personal preference, and I'm sure there are cleverer people than me who can give statistical analysis

frowner

thanks for taking the time to reply. That's what we were swaying towards so good to hear that someone else thinks it's a sensible plan.

CLAPTON

a 47k mortgage at 3.95% over 12 years should work out at about 410 per month

in 24 months you will pay about 3,400 interest

however your 47,000 could earn say 2% interest i.e. about 2 x 47k x 2% = 1,880

so with fees of 1,419 it all looks a bit marginal

frowner

CLAPTON wrote: »

a 47k mortgage at 3.95% over 12 years should work out at about 410 per month

in 24 months you will pay about 3,400 interest

however your 47,000 could earn say 2% interest i.e. about 2 x 47k x 2% = 1,880

so with fees of 1,419 it all looks a bit marginal

Thanks for your reply. Is there any worth in keeping the mortgage open with a nominal balance or would you just get rid?

frowner

Thanks for the responses. Just a quick question as we are going to go and pay it off this week. Have been reading lots about the admin charge and claiming it back etc. Do I need to pay it up front first and then approach them about claimimg it back or is there another way around it? Many thanks in advance.

getmore4less

Whats the charge to shorten the term to say 5 years?

Increased payments from the savings with £500 overpayment will probably be cheaper than the ERC.


Have you used your ISA allowances?


If you do want to go down the overpay route DO NOT do it for all the money

you can pay £500 each month for no fee so why pay the fee for next month and the month after that, there is an optimum amount to leave outstanding to make se of the free overpayments.

dimbo61

Read the paperwork that came with the mortgage ! Does it say there is an exit fee of £295 or was it less when you signed up for the mortgage ?
Now if you ring the mortgage center the staff will just give you the current fee and only when you check the paperwork would you find out if its less.
Would defo ask to reduce the mortgage from 12 years down to 5 over even until the end of the fix ( 3 years ) if they will allow.
That works out at £1387 a month over 3 years and £864 over 5 years
Hate paying ERC and you could get 2.8% tax free in cash ISA ( 2X £5100 )

frowner

Thank you both you are soooooooo helpful! And apologees for being so ill informed!

Exit fee of £295 is as stated on my mort paperwork so guessing i've not got grounds to claim that back.

However have rung A&L and I can reduce the term to the end of the fix (3yrs 9mths) for a £25 admin fee. Doing this means we don't have to pay the erc at all and we can still overpay up to £499 a month without penalty.

Only thing to weigh up now is savings accounts etc as we already have 2 ISAs so need to do some research there.

Jock_Tight

frowner wrote: »

Only thing to weigh up now is savings accounts etc as we already have 2 ISAs so need to do some research there.

Lloyds TSB Vantage accounts, 3 each, £21k @ 4% if you cycle £1k between them.

Thats £42k @ 4% you could be making.