Should I repay £30k part of interest only fixed mortgage

getmore4less

Most penalties are on the amount overpayed not the original amount.

If there is a term that if the full amount is paid off then there is a extra penalty going back to the origional ammount that is easily avoided. (may actualy be unfare but why test when there are simple solutions)

The advanatage of a reduced term and penalty free overpayments is there is no penalty if the mortgage is paid off early.

What we need to know is the shortest term the lender will allow the £30k fixed rate interest only mortgage that has 15month to run on the fixed rate, also we need to confirm the penalty free overpayment.

With this we can work out the optimum stratagy.

Stigofthedump_2

JimmyTheWig wrote: »

Hi Karen,

That's a great answer. I presume the repayment figures given (e.g. £1217) includes the repayment on your other mortgage, too.
I presume also that you are able to reduce the term of your interest only mortgage without affecting the other mortgage.
.

Jimmy
I may have asked the borrower the wrong question - I asked if we could reduce the term of the £63K after converting to fully repayment
The figures quoted are for the initial borrowing only (£63K) not the further advance (£34K)
It might be worth asking if they would allow us to convert to repayment (fee £50) reduce the term to 1 month (fee £20) pay the £30K then extend the term back to the 11Yrs (fee £20) - it would enable us to avoid the ERC and repay the £30K - but as you say unlikely to be possible.

JimmyTheWig

You don't want to reduce the term of the initial borrowing (not while you've still got the additional, anyway). If you did it would mean more of your repayments going towards the initial loan, which you don't want to do.

You need to see if you can convert the additional loan to repayment and reduce the term of the additional loan without affecting the term of the initial loan.


But the point does need to be restated...

This is a really interesting intellectual exercise. I'm learning as well as enjoying the challenge.
But it's not my money at stake.
Do you think that you understand this enough to get it right?
Do you think it is worth doing all of this (and risking getting it wrong) to end up £100 better off?

[I'm not saying that the answers should be no, but that you need to think about the questions.]

Stigofthedump_2

Jimmy,
Understand - the complication for us is that in a way we have 3 portions to our whole mortgage approx £30 in each of IO Fixed, Repayment fixed and Repayment variable - messy I know but as soon as the fixed rate is 'off' we will be in better place to revisit the whole to bring all together again as one simple mortgage.
I'm interested in the discussion and intelectual exercise as well but as you say we probably dont understand the finer points enough and will almost certainly opt for the simpler option of paying the £30,900 now and swallowing the ERP fee - it all makes our overall borrowing balance look better and those unknowns of how much we may have gained or lost thorugh share prices changing in the ISA we will never know about or care to work out - the real positive for us would be that we can see exactly how much we owe and know we are more in control of that than the stock market.......

JimmyTheWig

Karen,

I think that that certainly seems like the best solution for you.

Once you've decided, get on with it quickly.
You'll still pay the full redemption penalty whenever you do it, but every day is costing you nearly £5 in interest.