Should I remortgage with only a little left to pay?

thenap80

Hi.

My 5.72% fixed rate deal with Santander is coming to an end in June and will then revert, as I am told in the letter they have sent, to their SVR of 4.24% (better than what I am on at the moment - woohoo!)

Come that time I have a chunk of savings that I have in an ISA which I want to use to whittle down the mortgage so in essence I should only have I reckon about 20K (maybe even less) left to pay which I am looking to pay off at a rate of about at least 2k/month.

My question is, with a small amount left to pay and hopefully over a short period (by Christmas if I'm lucky), is it worth still changing deal as I assume that most chanrge a set up fee.

And in any case, is 4.24% not good for a SVR...it is even less than the fixed rate I am currently on. Are there much better deals to be had out there?

Thanks for your help

B

TrickyDicky101

I understand that many (if not all) lenders have a minimum amount you can borrow (or remortgage) so you may be below this limit if you only have £20k left to pay. Also, if you will pay this off in less than a year, you are barely paying any interest on the balance as it is (nearly all your repayments will be capital) so I struggle to see much benefit to you of entering another deal. Any fees you would have to pay would likely wipe out any potential savings.

getmore4less

First direct have a £10k lower limit.


The issue you have is once you pay off the mortgage what do you do with the surplus, it is way more than the ISA allowances which are use or lose

You need to look at the bigger picture and after mortgage free, if you pay tax it si more critical to think ahead.


The problem with any move will be recovering the fees over such a short period.
also with such a short period interest rate is not so much of an issue.

I looked at barclays they allow offseting of ISAs and cuurently have a fee free options but unfortunaly offsets are not included in these.


You might want to consider keeping the ISA and paying it off over a longer period, if rates move alot you can always reconsider, cashing in older ISAs and refilling the current allowance.

thenap80

getmore4less...that is a good way of looking at it. Didn't even think about it that way. I'm so dead set about paying the mortgage off! I guess I will have to weigh it all up. It takes a while to build up an ISA so to take it all out in one hit may not be the right thing to do. I guess what I may do with your advice is look for a better deal and leave the ISA alone. That will leave me with a mortgage of aboyt 40k left to pay. At that amount, I still wont be paying too much interest each month.

Gonna give this some serious thought!

getmore4less

OK,

So you have £40k mortgage and £20k ISA and £2kpm

cash ISA allowances say £5300 (1) or £10600(2)

ISA can get say 3% and that is equivilent to 3.75 or a tax saving of 0.6%

Starting with the options SVR 4.24 and £2kpm

£20k about 10 month and £400 interest
£40k about 21 months and £1580 interest
£20k ISA savings @ 3% over 21 months £21080.
so about £500 to make up.

£20k @ 0.6% tax saving is around £120py(more if rates go up) pay back 4ish years.
(it may actualy be less if you work it out properly, I would need to think about the model a bit more with the savaings in year 2 if you cashed in the ISAs)

probably worth modeling various savings mortgage senarioes in a spreadsheet

After mortgage free you may want to look at full S&S ISAs and if you have 2 allowances you can use up most of the £2kpm.