Is it worth paying to get out of fix

dixie_dean_2

Currently fixed at 4.69% till 1/9/14 on a debt of £110,000. Early replayment is £3282. House is worth about £160k. To my mind, if I can get, say, a remortgage for 5 years, at around 3.5% with little fees I'd be better off. Any thoughts?

Meeper

If an Everton legend has done his calculations, who am I to argue?

chopper78

What are your current mortgage repayments?

YBS have a 5 year fix at 3.39% with a £995 fee with 75% LTV. Assuming you have 15 years on your mortgage remaining, at 4.69% your repayments would be £865; at 3.39% the repayments are £790. So only £75 a month saving. Over the course of 12 months, you'd be £900 saved in interest, but less £995 in fees and less £3282 in ERC, so £3377 worse off. Over five years, you'd save £4500 in interest but pay £4277 in ERC. So £223 better off, but that'd be swalled in a valuation fee, legal fees and anything else. This picture also assumes that you have the ERC and new mortgage fees in savings rather than having to add it on top of the remortgage, which would make the picture even worse.

Lots of assumptions made, but it really doesn't look like you'd be any better off and in fact would be lots worse off over 12 months and slightly worse off over five years. What would leave you quids in is if come September 2014, we have hyper inflation and interest rates have soared to 12%, by fixing for five years from now you'll be laughing for a couple of years.

dimbo61

So better off to not waste best part of £5K on ERC,s and fees to move lender and overpay what ever you can afford each month SIMPLE

collen

For me it will be time consuming and risky because we often neglect the fact that mortgage rates are changeable but applying on remortgage can also help just try to focus on the details.

Wh05apk

I think there is much as issue here of what will rates be in 2 1/2 yrs time when you come out of your deal, if they are back to 5/6% you may regret not biting the bullet and remortgaging now? on the other hand, doing it now will DEFINITELY cost you £3k+, given the short time o/s and the high erc, I would probably wait.

dixie_dean_2

Yeah, I was factoring into it the benefit of the extra 2 years fixed when rates COULD be high, although some people are now predicting they'll stay mega low for another 5 years. The mortgage is interest only with a small overpayment. I was basing my calculations on a 1% saving equating to £1100 per year - is that right or am I being too simplistic and missing something?

SAMMYE_2

dixie_dean wrote: »

Yeah, I was factoring into it the benefit of the extra 2 years fixed when rates COULD be high, although some people are now predicting they'll stay mega low for another 5 years. The mortgage is interest only with a small overpayment. I was basing my calculations on a 1% saving equating to £1100 per year - is that right or am I being too simplistic and missing something?

Almost certainly going to stay low in my opinion as the banks are still offering pretty low fixes for 5 years!

Wh05apk

SAMMYE wrote: »

Almost certainly going to stay low in my opinion as the banks are still offering pretty low fixes for 5 years!

I think they will be low for a couple of years at least, but if the markets start thinking they will rise, then long term fixes will start rising, by the time you realise it will be too late to get a good deal.

Another consideration is that when the UK gets our credit rating downgraded once the credit realise the EU now won't bail us out if we get into trouble, then our rates could soar like Greece/Italy/Spain etc.

Having said that, I think I would still sit out your penalty, possibly look for a deal 6 months before your existing deal ends.

dixie_dean_2

I really appreciate the advice. It hurts me to be on 4.69%, which I know, historically is a decent rate but my reversion rate from the old mortgage would have been 2%! And no fees. And no hassle. But all the prevailing advice at the time was to fix as rates would go up. And I've been reading in the papers pretty much every week since (with the odd few month exceptions) "5 year fixes are going up, fix now" and they never bloody have! Oh well. I'll stick it out and hope I can get something decent in 30 months ish.

getmore4less

Follow on rate for current deal?