Early repayment charges - should I take a hit now?

thrifty2spend

Hello, I wonder if someone better at figures would be able to help. I realised I had earlier posted this in the wrong forum, apologies!

I am in the first year of a two year variable rate mortgage at 2.79% above the base rate (2.79 + 0.5, rate currently 3.29%) paying approx £400 a month. I want to overpay but can only do 10% of total mortgage (£95,000) for each of the first two years without attracting charge.

Early repayment charges for the next 12 months are 3% of amount repaid (on anything over the first 10% in the year), and next year they will be 2%. Overall, if I were to pay the full mortgage off (I wish) the total charges I would incur are approx £2,800. The charges would be nil after the second year. However...

With the BOE rates being so low now, would it be cheaper to attract ERCs on any amount over the 10% and balance that hit against the interest saved along with possible interest rate rises over the next 24 months? Surely I would be paying more than £2800 in interest alone by the end of the second year?

I aim to pay the mortgage off completely by 2013, so I am in a good position to throw money at the mortgage, much more than the 10%.

Thank-you!

dimbo61

well I hate the idea of paying any ERC,s so with your rate so low and cash ISA,s paying 3% why not overpay the 10% allowed and then fill your cash ISA,s allowance before april 4th if possible and the same again after the 5th £5100 each!
There are regular savers that pay good rates and build up savings so in 2 years you can clear the rest of the outstanding balance.

pawlala

I hate the idea of paying ERC too, but I'm still trying to figure out if I'd save in the long term by paying one now rather than paying more in interest over the two years?