Should I break my 5 year fixed rate?

MonkeyMama_2

Thanks I will have a look at the debt forum, I guess the main question still stands - if we couldnt sell up for a variety of reasons, would it make financial sense to stay on current mortgage or move? Good point about new mortgages requiring more evidence of repayment vehicle. What will they generally accept for these and do we have to show we can pay off everthing or can we say that we have e.g. an isa in place to repay some but then are relying on wage increases or yearly bonuses (we are not talking the banker type bonuses here btw but an extra couple of grand) to pay off rest?

HappyMJ

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.

It may be the biggest but it's not worth remortgaging. You need to increase your income (lodger maybe) and decrease your expenses.

MonkeyMama wrote: »

Thanks I will have a look at the debt forum, I guess the main question still stands - if we couldnt sell up for a variety of reasons, would it make financial sense to stay on current mortgage or move? Good point about new mortgages requiring more evidence of repayment vehicle. What will they generally accept for these and do we have to show we can pay off everthing or can we say that we have e.g. an isa in place to repay some but then are relying on wage increases or yearly bonuses (we are not talking the banker type bonuses here btw but an extra couple of grand) to pay off rest?

I'd stay on the current mortgage. ISA's are acceptable. A pension lump sum is acceptable. If it's a buy-to-let then then sale of the property is acceptable but not as an owner occupier. Wage increases are not. Sale of shares given with certain jobs are acceptable.

DannyboyMidlands

If you're not likely to be there longer than 5 years why not move sooner rather than later? Sell up, buy a place for 300k cash and put your feet up rather than spunking 20 grand a year in interest payments to the bank.

MonkeyMama_2

also even if we could sell, we would still have to pay the ERC for redeeming mortgage early as we would have to buy a cheaper property so would not be wanting to port the whole mortgage like for like.

MonkeyMama_2

Re selling - its a difficult year to do that as our eldest is starting school in sept and if we move now, its going to disrupt whole process and she will have to rely on getting a one off place somewhere else.. Also we bought our house when prices were lower, we couldn't afford to buy our house now - stupid london prices. Hence why I am trying to find a strategy that doesn't involve selling.

MonkeyMama_2

Happy MJ - thanks for note that pension lump sums are acceptable - I will do some digging in that area see what that would cover.

Thrugelmir

MonkeyMama wrote: »

Thanks I will have a look at the debt forum, I guess the main question still stands - if we couldnt sell up for a variety of reasons, would it make financial sense to stay on current mortgage or move? Good point about new mortgages requiring more evidence of repayment vehicle. What will they generally accept for these and do we have to show we can pay off everthing or can we say that we have e.g. an isa in place to repay some but then are relying on wage increases or yearly bonuses (we are not talking the banker type bonuses here btw but an extra couple of grand) to pay off rest?

Hard to beat a straight repayment mortgage.

With the high ERC. Perhaps best to dig in and see what you can repay off the mortgage. As reducing the mortgage will lower the ERC.

JimmyTheWig

Short answer... No.

Longer answer...
Paying £19,000 to save £750 a month will take 25 months before it becomes worth it. What do you think interest rates will do in the next few years? I personally don't think that they're going to stay this low for the next two years. Which means that before the 25 months are up (and you've saved yourself what you've spent out in ERC) your monthly payments will have gone up... which means it will take more than 25 months to recoup the fees. On my thinking you will probably never recoup them.
Add to that the fact that you'd be extending your borrowing by £19k (as you don't actually have the money to repay the fees) which you'd then be paying interest on.
Plus the fees for taking out the new mortgage (not particularly relevant in your case with such a large loan, but still worth considering).
And the fact that if you add your other debts into your mortgage and end up not being able to pay then you'll lose your house. (Turning unsecured debt into secured debt isn't usually a good thing.)

Plus, obviously, the other comments above that you may well not get a great mortgage in today's climate.

Do an SOA.
Cut down your spending.
Increase your income where possible.
Get those debts paid off.
Make overpayments on your mortgage to reduce what you owe.
Then you'll be in a much better position when your fixed rate ends to be able to remortgage or move.

kingstreet

Three issues.

You'll need evidence of the pension plan's ability to repay the mortgage at the end of the term.

Do you have enough income to justify the size of mortgage you'll need to move to a new lender?

At 4.15%, you're currently paying £1,452 per month. On a very good tracker at 2.89%, you'll be paying £1,011. That's £441 saving each month. Not as much as you are suggesting, so what rate have you found and who with? £19k penalty at £441 per month is going to take 43 months to claw back.

MonkeyMama_2

Kingstreet - Mortgage Broker found me a tracker at 1.98%...need to research where she found it and income is fine for new mortgage at same amount. Pension plan I need to research a bit more.