ERC-Stupid Question?

corgi74

This may be a stupid question and apologies if it is.
I'm having a little look around at fixed rate deals at the moment as I expect interest rates to start increasing soon.
I currently have a mortgage with Santander and I am tied in to a 2 year fixed rate of 3.99% deal until May 2012. To come out of this early will cost me £1946.
I'm wondering if there are any providers that will cover this charge if I move my mortgage to them. I'm not that fussed about a better rate as 3.99% is still good but I would like a longer term maybe 5 years.
My outstanding balance is 'only' £65K so maybe this would have an impact on any offers.
As I said apologies if I sound stupid and any advice would be appreciated.
Thanks

Thrugelmir

Few questions asked on this forum are stupid. Certainly not yours.

By covering the charge. Do you mean paying it or incorporating it into the remortgage ?

While the reduction in interest may look appealing. You will need to repay this additional £1,900 so need to factor it into your calculations.

While your outstanding mortgage balance is low in monetary terms. The more important fact is your LTV. This determines the ability to obtain better rates.

corgi74

Many thanks for the reply.

My house is worth approximately £125K and I have 16 years 5 months left of the term as I have been overpaying. I wouldn't want to increase the term and if possible I would like to pay a bit more to reduce the term even more.

If I can stay at 3.99% with whichever provider I would be more than happy although if I could get a reduction but if the ERC is amortised into the loan it would probably even out.

What would you suggest?

Thrugelmir

corgi74 wrote: »

What would you suggest?

Continue overpaying by as much as you can afford. The mortgage only has to be repaid once. Once mortgage free, life becomes a lot less stressful. While that may be in the distance its a target worth going for ( in my opinion)

corgi74

Totally agree but I don't want to be in a situation next May if interest rates have gone up 0.25% every month from February this year and have hit 4% when I need to get a new deal.
I would be looking at maybe 6.99% fixed then if I'm lucky.
With inflation as it is this isn't impossible.