Worth incurring early redemption penalty to pay off mortgage?

hoof

Currently have circa £125k outstanding on 4.9% fixed mortgage and circa 3 to go until 4% early redemption charge ceases to become payable. Can overpay 10% pa with no charge.
Will have sufficient spare funds soon to pay off mortgage.
Would seem to be beneficial to do this and incur early redemption charge rather than delay paying off for further 3 years given the relatively high interest rate versus what I could achieve for savings?

GMS

How much is your property worth?

You need to know what rate may be available to you if you change, and take into account any arrangement/valuation fees etc.

hoof

Was not planning on re-mortgaging. Will be receiving some money shortly that I could use to pay off mortgage completely so was wondering whether worth incurring early penalty to do this rather than continue paying mortgage.

getmore4less

You need to do the numbers based on the various senarioes and see where you are in 3 years.

Don't forget the normal monthly payment.

Also check with the lender if they will reduce the full term to 3 years there is a good chance this may be a reasonable option.


Paying off now £125k+4% is £130k

3 year term
£125k 3 years @ 4.9% £3740pm after 3 years £29 owing

So using the funds to draw down, depends on the rate you can get 2% net is easy unless a 40% tax payer

£130k 3 years @ 2.0% £3740 draw down after 3 years -£600(ish) left.

To break even you need a net rate around 2.3% on the savings which might be doable

Now if you believe all these rates are going to rise people then it looks like a 3 year drawdown might be the better option.
The 10% overpayments will improve the drawdown situation.

Depends where your money is and what rates you can get.

Since your costs are fixed you could use fixed rate bonds for some of the cash. SOme in one year some in 2 year, you also have you monthly payment to consider.

Don't forget ISA's are use or lose so you might want to consider them in the plan.