Should I break my 5 year fixed rate?

MonkeyMama_2

Hi

we currently have a 5 yr fixed rate mortgage taken out a couple of yrs ago. Its for 420k at 4.15%. We are interest only. We are struggling a bit with money right now and I was wondering whether I could remortgage onto a lower rate to cut our monthly payments. Given the current rates, we could reduce our payments by 50% it seems which would save us a lot of cash. However, and here is the stinger, the mortgage has a 5% ERC for the life of the mortgage, which would mean adding a whopping £19,000 (when we have taken advantage of the 10% fee free early repayment) to our mortgage when we remortgage. I am trying to work out whether its worth switching or not when we have such a hefty fee to pay, but we have about 32 mths left of our fixed rate and will save around £750 a month moving to the lowest rate 2 year tracker. In addition we have about £20k worth of debt - credit, loans, overdrafts - wondering whether to add that to mortgage too? First time poster so would be really grateful to receive any thoughts on this!

Thrugelmir

What repayment vehicle do you have in place for the mortgage?

somethingcorporate

How much is your house worth? Your current rate is very very good.

I cannot see the potential benefit being worth it, especially when moving from a fixed to a tracker. You have an interest only mortgage and a large amount of unsecured debt, it would appear that you are living well beyond your means.

Head over to the debt-free-wannabe forum and pick up some tips for reducing your outgoing, otherwise you could be heading for a financial meltdown.

MonkeyMama_2

House is worth about 750k and not really a repayment vehicle in place unless you count equity in property and fact that we are not likely to be in this house more than 5 years and will then move and go onto partial repayment in new place . Also relying on regular bonuses etc to help pay off, but so far have not been able to overpay any as I think we may have overstreched ourselves.
I know its not ideal, but all savings we had we literally thew into deposit for house.

alexlyne

If you have a high LTV, you may not even be able to remortgage - banks have tightened up their lending and may not throw money at you like they did a couple of years ago.

I'd love to be on 4.15% mortgage!

MonkeyMama_2

one of my hopes for reducing our outgoings was to move to a smaller mortgage...
I am currently paying off the debt at £500 a month so i am not sitting back hoping it will go away on its own . £7k of the debt is on an interest free credit card which I move every time the 0% deal runs out. and £10k is a loan at 7% which will be paid off in 3 years.

MonkeyMama_2

our ltv is 57%

_Andy_

IO and 4% and you're struggling? seriously just sell up

MonkeyMama_2

I need to look at all our outgoings of course but as the mortgage is the biggest, I wondered whether to try and reduce that first.

Thrugelmir

Most lenders will now require evidence of a repayment vehicle if the mortgage is to be on an interest only basis.

Suggest you consider selling up and buying an affordable property. In the process clearing your other debts.

Thrugelmir

MonkeyMama wrote: »

I need to look at all our outgoings of course but as the mortgage is the biggest, I wondered whether to try and reduce that first.

Start with items that are luxuries and non-essentials. Every pound saved then can go towards reducing debt.