Advice re Early Repayment please

the4bennetts

Hi

I would really value your advice guys as I feel responsible for our current mortgage tie in.

We had a £222K mortgage in Jan 2010 and signed to a 7 year fixed at 4.99% with 19 years 9 months term to go. At the time, we wanted to know what we were paying £1480 per month and it seemed sensible - at the time!

I know very little about mortgages but just dont see that with the economy as it is, raising interest rates in the next couple of years would help. I wish I had just tracked the base rate.

£11K is the redemption fee plus extras which would take us to £12,700K until Aug 2013 when it drops to £9750but I dont know how much we are losing every month to work out if we should take this hit and get out. I hear others are paying 1% so it all adds up. However, we are paying extra off the mortgage from next year - only £600 to ensure we are mortgage free with time to go and enjoy the monies.

I dont know what to do for the best. I do have shares so could pay us out of it but who knows what will happen until 2016. However, we are now financially more secure so wouldnt need the security as much if interest rates went up.

Any advice much appreciated. Thank you.

_Andy_

£11k to make some short term saving is madness.

the4bennetts

Thanks Andy, I just dont know what savings we could make over the next couple of years. If we are paying double what we should, in my basic brain I worked out we could be paying £17K more than we should be. Unless, I have completely lost the point of all of this.

Would you suggest going to see a financial adviser?

_Andy_

You've got a great fixed rate (and the stability which you wanted). Stick with it.

the4bennetts

Thanks Andy, Do you think the interest rates will move above 4.99 at some point?

dimbo61

There is a very good chance over the next 7 years but have a look at your deal ?
Can you overpay even 10% a year? If so then overpay each month and reduce your debt and become mortgage free sooner.
You dont talk about deposit or LTV on the property but I am coming to the end of a 5 year fix at 4.74% and have been happy with my decision.
Time will fly by and most mortgages are 25 years so its more a marathon than a sprint
Long term security GOOD LUCK

TrickyDicky101

If you were paying at the market leading rate (offered by HSBC I believe - and this deal may not be available to you depending on LTV and given that all the adverts I've seen for it stated it was only open until 31st Oct 2010) at 2.19% - this is a lifetime tracker product at BOE + 1.69% (apologies if I have the rate wrong = doing this from memory) then your monthly payment would be around £1,155. The next best rates that I have seen (again, very limited experience and from memory) are at 3.6% at which point your repayments would be around £1,310 per month. So you could save a maximum of £320 per month if the HSBC product is available and if you were accepted, or only £164 pm if only next best was available.

However, this is a tracker and so will rise in line with the Bank Of England's base rate so you won't be on 2.19% for the term of the mortgage - in fact it might be for under a year you get this rate. Each 0.5% increase in the base rate would cost you in the region of £55 per month in additional interest.

In my opinion, you are on a great rate at present and the cost to extricate yourself is substantial - you should be happy with what you have and mark any additional cash to go towards mortgage overpayments (within the level permitted to avoid any ERC).