Should I pay an ERP and get off fix if interest rates are due to remain low? options?

Lord_Isleworth

[FONT=&quot]We have tried unsuccessfully to appeal to Santander to get off a 5 yr fix that ends May 2013 (5.79%) [/FONT]
[FONT=&quot]The redemption is a whopping 7k and this has stopped us jumping ship until now. [/FONT]
[FONT=&quot]We owe £175k but have 20k in place to overpay Jan 2012 so our mortgage would be 155k with 14 years to run and the value of the property is roughly 320k [/FONT]
[FONT=&quot]Questions: [/FONT]
[FONT=&quot]Now I see the USA rates are guaranteed to remain low for the foreseeable future is it worth taking the hit and moving to a more competitive deal such as an offset with low fees and flexible terms? [/FONT]
[FONT=&quot]Can I ask Santander to increase our current repayments but shorten the load by 12 months which would mean we could start looking at a new rate quite soon but without having a massive ER to pay? Would they do it?[/FONT]
[FONT=&quot]Would I get decent mortgage options if I have two children, earn 48k but wife’s not working and LTV is roughly 50%? [/FONT]
[FONT=&quot]Any thoughts appreciated. [/FONT]

Engeroosi

There has never been anything to suggest any mortgage lenders will reduce or waive the ERC, apart from Northern Rock who did it just to get people off their mortgage books.

Sorry this is prob not what you wanted to hear. I also have bit the bullet and going to pay an ERC of £2300 to come out of a fixed deal but I should recoup this in 9 months and also pay off mortgage 8 years sooner. So I think its a small price to pay for the long term gain.

With your LTV you would have the pick of all the best current deals, whether you get accepted would depend on the background details. Worth seeking advice from a qualified mortgage advisor though.

Lord_Isleworth

I challenged santander because we took this mortgage out just before rates were slashed and we originally requested a 2 year fix and they said it was 5 years or nothing which I thought was unfair at the time.....regretted it ever since!

Hugbubble

Lord_Isleworth wrote: »

I challenged santander because we took this mortgage out just before rates were slashed and we originally requested a 2 year fix and they said it was 5 years or nothing which I thought was unfair at the time.....regretted it ever since!

But presumably, you could have looked elsewhere for a 2 year fix?

Lord_Isleworth

Wasn't aware Santander staff posted on here

Engeroosi

The fact is that you(and I!!) happily signed up to the mortgage thinking we were getting a good deal for the market at the time, had the rates went up we would be on here bragging about how low our rates were, but because the rates have been slashed we are now complaining that we have to pay the ERC which we both signed and agreed to pay if we wanted out in years agreed deal.

So all in all as much as it pains me to say this we are the ones who got ourselves into the deal and we are the ones who have to get us out the deal if you want to benefit from low rates.

Of course we could use the amount for ERC just to overpay the current deal and use any spare money we have to continue to overpay but in the long term if rates stay low then we might kick ourselves for not biting the bullet. In my scenario I need low rates for 9 months to make it beneficial. It might be worth checking how long it would take for you to be better off, maybe the risk outweighs the security and your better off where you are.

Lord_Isleworth

Other deals have cheap ERP - why is Santander so expensive compared to others?
I would pay 2k but 7k is a joke in my opinion. before anyone says I am aware that this would have been communicated before we signed up so you live and learn....all my fault.

Lord_Isleworth

Does anyone know is santander would let us reduce our term for a fee??

Engeroosi

It does seem a bit excessive, it is usually a percentage of remaining balance, in my case it was 5% in first year,4% in second year, 3% in 3rd year 2% in the 4th year and the 5th year. Which is why I am waiting until november so it is only 2%. plus I am allowed 10% of starting balance each year overpayment with charge. Which I have utilised to the max in the last year to enable good remortgage options.

You might find you have an overpayment allowance, and also your erc charge reduces the closer you get to the end of the fixed rate. Worth checking out. I doubt I would pay 7k to get out of the deal, would rather use it to reduce the balance on current deal.

Engeroosi

I know some lenders do this for free, but most will reduce the term for an admin fee of around £25. Bear in mind though this commits you to higher monthly payments every month!

dimbo61

First of all read the paperwork that you signed when you took out the mortgage
What does it say about overpayments ? can you pay off 10% each year even on a fix ?
I reduced my term from 22 years down to 10 years ( when on a 5 year fix!) and it cost me £50!!!
This also saved me £50,000 in interest over the term
So ring up the mortgage centre and ask the question Can I reduce the term ?
You may then have the chance to overpay by £17,500 this year or reduce the term and you will save 5.79% TAX FREE.