Stick or Switch?

macgirl

Hello MFW'ers

As of today our mortgage balance is £232,705.20
We have been overpaying £132 a month for the last 5 months which - according to the MSE overpayment calculator will knock off over 4 years! :j

However, we are on a 5 year fix @ 6.6% (ends August 2015) we rented out our first home, so remortgaged and this was the best deal on offer.

Obviously rates are low and it's killing me that our rate is so high.
I rang today and the ERC would be £9348. Looking at the Ditch and Switch calculator it seems we might be better off switching. We're with the Natwest and could get a 2 year fix @ 5.09% with a £999 fee, which we'd add to the loan.

We bought in Sept 2010 so according to house price sites, the value has dropped by £12k, but I don't know how much the mortgage uses such sites to work out LTV....

Can anyone tell me if this is a good idea or are we better staying as we are and trying to up the o/p asap?

Many Thanks

museumworker

hello macgirl, great to see you on here, and hope debt free life is treating you well!

I am by no means an expert on this sort of thing, and there are people on here who are wizzes with spreadsheets who will be able to give you much more accurate answers. However, here is how I have worked it out:
6.6% x £232,705.20 = £15,358 interest per year. (it'll be less the second year as you will have paid off some of the capital, but don't ask me to work that out, lets just pretend it is roughly the same for the 2nd year )
5.09% x £232,705.20 = £11,844 interest per year (x2 as above :o)
That works out a difference of roughly £3.5K per year. As it is only a 2 year fix, that'd be a saving of £7K over the 2 years.

ERC is £9.3K and £1K fee (+ 5.09% interest on this fee for 2 years).

In that situation I would therefore stick, unless you can get a much much better rate, and concentrate on paying off what you can to get your LTV% in a better place for remortgaging in 3 years.

As said, I am not an expert, and so if I have this horribly wrong I stand corrected.

Also hope you'll start a MFW diary, I miss your postings!

macgirl

Hi MW and thanks for your calculations!:hello:

I have realised switching was not a clever idea at the moment and tried to delete the post but couldn't

Not entirely debt free - but that is another story for another time - life has a way of serving curveballs doesn't it?
Other than that life is treating us well and we're very happy living here.

Will consider starting a MW diary but I end up spending too much time on MSE if I'm not careful, so might just stick to lurking!

Happy New Year and thanks again x