remortgage help

markbowen07

Hi

Iim thinking about moving my mortgage and am after some help. I am currently on a fixed rate of 6.39% with the halifa untill july 2013 with an early repayment charge of £3100 . Am i better of paying the £3100 off the current mortgage and sticking with the halifax mortgage or paying the ERC and swiching providers? The mortgage i would prefer would be a 2 year tracker or even a 5 year fixed. Any help would be greatly appreciated. I'm currently paying £1001 pcm and have 8 years 10 months left in mortgage:beer:

lookingforideas

The major issue is how much is your current morgage - based on what you have said I would estimate £80K.

Doing some quick maths

2 year tracker costs over two year:
Repayment Fee: 3100
Remorgage cost: 1500
Interest over two years @ 2.5%: 4000
Total cost: 8600

5 year fixed costs over two years
Repayment Fee: 3100
Remorgage cost: 1500
Interest over two years @ 4.3%: 6880
Total Cost: 11480

Current deal over two years
Interest over two years @ 6.39%: 10224
Total Cost: 10224

Numbers aren't accurate as haven't factored in interest savings due to repayments of capital over the period and haven't factored in additional interest in the event that all the fees are added to the new mortage. However based on the above the two year tracker is the only one that saves money and that is at risk that rates will go up over the next two years (if the average tracker rate was 3.5% over the period then there would be no saving). Against that the five year fixed rate allows for certainty over the period and only you can decide whether it is worth paying for that - also need to consider that won't need to pay any remortgage fees for another five years whereas on you current deal and the two year tracker you would be looking at incuring these in two years time.

Somewhat disappointing as had expected that based on a 6.39% rate there would be savings.

If you get quotes for mortgages I'm sure even when they add in the repayment fee and re-morgage costs to the new morgage amount there will be monthly savings but the new mortgage would be higher at the end of the two year period compared to the current morgage.

Worth getting a professional to do the calculations for you but need to factor into any calculations the fact that in two years you will hopefully have a better rate when your current deal expires.

markbowen07

lookingforideas wrote: »

The major issue is how much is your current morgage - based on what you have said I would estimate £80K.

Doing some quick maths

2 year tracker costs over two year:
Repayment Fee: 3100
Remorgage cost: 1500
Interest over two years @ 2.5%: 4000
Total cost: 8600

5 year fixed costs over two years
Repayment Fee: 3100
Remorgage cost: 1500
Interest over two years @ 4.3%: 6880
Total Cost: 11480

Current deal over two years
Interest over two years @ 6.39%: 10224
Total Cost: 10224

Numbers aren't accurate as haven't factored in interest savings due to repayments of capital over the period and haven't factored in additional interest in the event that all the fees are added to the new mortage. However based on the above the two year tracker is the only one that saves money and that is at risk that rates will go up over the next two years (if the average tracker rate was 3.5% over the period then there would be no saving). Against that the five year fixed rate allows for certainty over the period and only you can decide whether it is worth paying for that - also need to consider that won't need to pay any remortgage fees for another five years whereas on you current deal and the two year tracker you would be looking at incuring these in two years time.

Somewhat disappointing as had expected that based on a 6.39% rate there would be savings.

If you get quotes for mortgages I'm sure even when they add in the repayment fee and re-morgage costs to the new morgage amount there will be monthly savings but the new mortgage would be higher at the end of the two year period compared to the current morgage.

Worth getting a professional to do the calculations for you but need to factor into any calculations the fact that in two years you will hopefully have a better rate when your current deal expires.

Thanks for you reply,
With regards to my outstanding balance you are right it is £81000, The fees that i have been quoted to arrange a new mortgage on the 2 year tracker is £650 and on the 5 year fixed £775. Do you still think it is worth moving mortgages? I have about £2500 in spare cash which i was going to use to cover the ERC, Or should i just pay the £2500 off my existing mortgage and hold out until it expires in june 2013? I personally can't see rates going up by more than 2% by the time my current deal expires thats why i'm temted for a tracker but i know the saving margins seem tight. My wife and i took the mortgage out as our first property in 2006 on a 30 fixed for 5 years at £108000 then in march 2008 we arranged for our mortgage to be cut to 15 years and doubled our mortgage over night to get rid of the loan asap now june 2011 we have 8 years 10 months left and that can't come quick enough. Any help will be greatly appreciated

lookingforideas

Not clear what the rates that you have been offered are -The figures I quoted where after a quick search for similar types of deal.

Not a professional so you either need to consult with one or make your decision based on your own analysis. Everyone has different priorities, circumstances and attitudes to risk and this determines what the correct descision is.

I've refined my calculations again to account for capital repayments and you can use these to decide which is the best option for you but I would still recommend getting a mortgage advisor to give you a more informed and additionally they should have software tools to do these calculations as opposed to my approximations in excel.

Average morgage balance for the 1st year should be about £77K and for year 2 £70K. If you multipy these balances by the interest rates that you expect to pay for the years in question and then add the remorgage fees and ERC that should give you a feel for which provides the best option.

Using the ERC and mortgage fee to instead reduce the current mortgage adds to the complexity and makes the decison harder using 3% for year one and 4% for year 2 for the tracker compared to paying off a lump-sum means that the costs are very similar.

I would be tempted to go with the tracker but it comes down to what is your view on interest rates, risk and priorities. My rationale for that would be based on the fact that I could afford the ERC and mortgage application fee and could pay for them up-front, the tracker cost was 2.5% and I could cope with any increases in morgage rates and didn't expect rates to go by more that 2%.