Remortgage Question move or stay

rfowler

Hi All,

I am currectly on a 5 year fix on 4.69% (ends 2014)

Was thinking of moving to a new 5 year fix on 3.69% (ends 2016)

My LTV is 61%

I need to remortgage for £160k + £5k for fees and penalty

If I move i cut down my term from 23yrs to 20yrs and pay the same amount.

Any advice peeps...

dimbo61

Put the figures through "whatsthecost" and work out how much you would owe over the five years but !! as you are only saving 1% by paying out £5000 in ERC,s I would doubt that you are going to save that amount over the next 3/5 years.
If you have a spare £5000 why not overpay your existing deal.
You also have to look at the follow on rate for both products !

bluu2k

Hi RFowler,

My friend is in a similar situation as yours so we are very much interested in following your threat to see how others think about it The figures in his case slightly differ from yours but I think the real major difference is he is considering an offset 5 year fixed at 3.69%

Dimbo, I raised the same question to my friend and what he said was:

(1) he already maximised/will maximise overpayment allowance to existing mortgage before moving to a new one, so paying more is not feasible,

(2) with a new one he will have longer fixed term so he will know what to pay in the next 5 years instead of 3,

(3) with offset mortgage he can make his money work harder so the saving between the existing one and the new one would be more than just 1% (he has his own business so gets hold of large cash flow in-and-out every month), and

(4) he's not worried too much about follow-on rate as he will remortgage again at the end of this new fixed term.

But I am not sure how much he could actually save due to large ERC and other fees to add on (valuation fee, product fee, legal fee and so on).

Can anyone shed the light on his case please?

Cheers,

dimbo61

I have recently finished a 5 year fixed offset and am now on a tracker so like your friend bluu2k I also put all our savings into the offset pot
I consider offset mortgage can be very good for self employed people ( only my view!!)
If you put the numbers into "whatsthecsot" and see how much you will have paid off over 3/5 years it will give you an idea if switching lenders adds up!
Dont forget all the costs to move mortgage

dimbo61

Rfowler I put your figures through "whatsthecost" over 3 Years ( upto 2014) if you stay where you are you will owe approx £147,531 and you are paying £948 a month ?
If you add another £5000 onto the mortgage in ERC,s you would owe £150,539 in 3 years but you mortgage would be £887 a month. ( £60X36 months =£2140 less mortgage payments )
So you would be about £800 worse off over 3 years but would still have 2 years left at 3.69%
Your call

samphe

Dimbo61 - maybe you could help me with a few facts and figures, or anyone else that can help please! My circumstances are similar to the OP.

We're trying to decide whether its worth paying the ERCs to move from our fixed rate mortgage which we're tied in to for another 3 years at 4.95%.

We currently owe £102,528, with the ERCs its £105,941. We currently pay £884 and have 13yrs outstanding.

We have 40% deposit in equity.

We'd need to incorporate the ERC and the arrangement fee (1.5k) in to the amount of the new mortage, so we're looking at a total remortgage of £107,500.

I've seen a rate for a 2 year tracker currently at 2.09% (13yrs) giving repayment of £787.

An alternative is a 2 year fixed at 2.39 (£802).

Our aim is to try and reduce our monthly payments, but need to know whether it is worth it when you take the ERCs in to acccount.

If neither of these options are worthwhile, can anyone suggest an alternative or are we going to be better off putting up with the higher rate for the remaining 3 years of our existing tie in?

I hope this all makes sense

rfowler

Thanks dimbo61, I will be paying around £1k a month plus I think with the new rate I know what I pay for a further 2 years

getmore4less

To do like or likes you have to make the payments the same, adding up the diffreence in payments does not give an accurate comparison.

dimbo61

samphe you cant compare a fix with a tracker !! as the tracker may rise with the BOE base rate increases
The 2 year fix saves you approx £80 a month so £1000 a year but the £5000 erc/new mortgage fee works out at £1650 a year so both the fix and tracker deal cost more due to the fees/erc
what does the fix move onto at the end of the deal ?

samphe

dimbo61 wrote: »

samphe you cant compare a fix with a tracker !! as the tracker may rise with the BOE base rate increases
The 2 year fix saves you approx £80 a month so £1000 a year but the £5000 erc/new mortgage fee works out at £1650 a year so both the fix and tracker deal cost more due to the fees/erc
what does the fix move onto at the end of the deal ?

Thanks Dimbo. I think it just moves on to the SVR. But at the time that it ends we'll shop around anyway.

I think you've just confirmed that we're not going to benefit my moving our mortgage. But i take comfort in the fact that at least our payments wont go up for a few year!

Unless you have any other suggestions??

dimbo61

Yes overpay if you can afford too and have no other expensive debt?
read the paperwork carefully to see what your mortgage reverts to and see what that is now !!!
Some lucky people are paying 2.5% and some over 5%