Overpaying on fixed rate mortgage

Ojilli

Hi Guys
First time I've posted - could just do with a little help
In a fixed rate mortgage deal at 5.6% until June 2013 with Santander - like a lot of other people it was a good deal at the time. Owe £206K the early redemption is about £8.5K.

Suffering not only because of the lower interest rates which we haven't benefitted from but also because I had a baby 18 months ago and am currently on a career break (but likely to be made redundant soon). We need to get our repayments down - they're currently £1550pm. We do have some savings and I would be willing to increase the term of the mortgage temporarily to get us through (current term 18 years). Need to get the payment down to around £1200 a month and could throw about £15K into the equation if necessary.

Can anyone suggest the best way to go - obviously I don't want to leave us without savings at all

Do I pay a lump off and then increase the term or the other way around or does it make any difference??

Can't seem to get my baby brain around it all.

Thanks in advance:)

firstaspect

I'd ring up Santander to discuss your options. There may be a limit to overpayments without a fee and you may or may not be able to change the term of the mortgage while within the fixed rate deal.

bilbo51

Why not put the £15K into an interest bearing account and pay £350 from there every month to make your monthly payments £1200 from income and £350 from savings. That will last 42 months by which time your high rate will have finished and your payments should be lower... unless rates rise of course.

Ojilli

firstaspect wrote: »

I'd ring up Santander to discuss your options. There may be a limit to overpayments without a fee and you may or may not be able to change the term of the mortgage while within the fixed rate deal.

Sorry I should have said I did ring Santander first - I can repay up to 10% of the balance a year and they will let me change the term of the mortgage.

Ojilli

bilbo51 wrote: »

Why not put the £15K into an interest bearing account and pay £350 from there every month to make your monthly payments £1200 from income and £350 from savings. That will last 42 months by which time your high rate will have finished and your payments should be lower... unless rates rise of course.

Not a bad idea - cheers - will have a look into that

dimbo61

10% of your outstanding balance is £20,600 !
If you paid off £15K you would have a smaller mortgage.
Now if you use "whatsthecost" you can work out how much that would reduce your mortgage payment.
But would this wipe out your emergency savings?
Using some of the savings each month to help with the pain of an expensive mortgage payments is a good long term solution.

getmore4less

Extend the term then use the funds to top up payments if they are still too high.

dimbo61

Are you going to get a good redundancy package ?
Will you get another job easily ?

Ojilli

Sat down with hubby last night and discussed it all. He has managed to spread the payment of the dividends from his business so that we have an extra £400 a month going into the current account a month instead of in one lump once a year.

I don't really want to throw a load of savings into the mortgage or extend the term unless we're really pushed to - but if we are we can always fall back on that option. We're just going to see how we go until after Christmas. We also have the option of paying off finance on my car which would free up about £300 a month and would make more sense since it'll be at a higher rate than the mortgage.

As for redundancy - I'm public sector and my employer has signed up to a 42 week redundancy scheme which means that that's the maximum payout - 42 weeks pay. I've been there about 16 years (9 part time - since the kids came along) and I reckon I will get around 27 weeks - which is rubbish and I'm not sure whether that will be pro-rated out or at my part time wage - waiting to see. I'm not sure I want another job quite yet - will wait til the youngest (18 months) goes to school before looking - or even start up something myself.

Just trying to juggle finances in the most effective way is a nightmare

slummymummyof3

Pay off the car loan and then if possible throw some extra money at your mortgage in order to reduce your LTV so you are in a better position when you come to remortgage??