Fixed Mortgage and ERC

stingy_rach

Hi Guys

Am going over this with OH and would like other opinions please.

We are currently 2 years into a 3 year fix @ 6.9% with Halifax. Our mortgage balance today is £174,821 and therefore our monthly payment is £1121. We are also overpaying a token £79 per month so £1200 in total. Whilst this represents a significant portion of our income (£3250 a month) we can currently do this and will also be able to save £500 a month from May.

However, I found out yesterday that I am pregnant and whilst I am really pleased I am also now concerned about sorting out the mortgage sooner rather than later. We are due to get £10,000 in a couple of months and I want to use this to reduce the mortgage balance. I called Halifax today and they have a link value for our house of £221,000 giving us 79% LTV but I don't think this is realistic. We bought new 2 years ago for £208,000 and nothing on our estate has sold since new. Good 3 bed detached are on the market in our area for between £190k and £220k but god knows if they'll ever sell.

Our dilemma if therefore:

1) Pay the £10k off the mortgage now (can overpay 10%) or keep in savings

2) If paying £10k off, do we look at leaving early and paying £3550 ERC but possible get a better long term deal before I go on maternity

3) Wait until the deal is up in January and hope we can get a better deal then.

We can save enough to cover maternity but after that it will be really tight if we don't reduce our payments. I don't want to take a payment holiday or go interest only if at all possible.


Phew, sorry for the really looong post but wanted to get in as much info as poss. Thanks in advance to any help

MB1919

1) If I was you, I’d pay £10k off the mortgage as soon as possible. Your fixed rate is at a relatively high percentage, and there’s little value in the £10k sitting around gathering little interest in a savings account. It will also reduce your LTV; there are many good deals at 70-75% LTV.
2) I would not pay an ERC of £3550 if the fixed rate only has another year to run.
3) That’s what I would do. If you stay with your current lender then they will most likely not ask for payslips, proof of income because they already carried out a credit check on you a couple of years ago. They’ll likely send you some offers for a new deal in the post.
Hope this is clear.
Babies are expensive, so you are right to think about the long-term implications of any decisions you reach. Good luck!

Thrugelmir

stingy_rach wrote: »

I don't want to take a payment holiday or go interest only if at all possible.

You may find that these aren't available options to you. Your lender will consider your circumstances before granting the request.

A payment holiday will be marked as authorised arrears on your credit record. This will be visible to future other lenders.

Where does the other £2k of your income go? Are you servicing other debts?

Keep the £10k in savings to fund you through your maternity period.

stingy_rach

Thanks to both of you.

Our income has only recently increased from £2700 and we currently spend £1850 on bills including mortgage, £200 on food, £100 car savings for MOT etc, £450 petrol (I know) which leaves £150 for everything else. The extra £500 salary for the next few months is to pay for a holiday which we booked before we had the news.

After this I think we can save £2-3k, plus another £2-3k from my bonus in May should definitely cover my shortfall on maternity. It's the childcare that's freaking me out!

Think I'm going to pay most of the £10k of the mortgage and then save rest until I am actually off and have a better idea of our financial position.

Cheers:D