Changing Mortgage Deal Early

dan_l

Hi,

I am currently just over 2 years into a 5 year first time buyer fixed mortgage with Nat West (rate of 5.99%) over 35 years.

I have just started looking into overpaying the mortgage and upon doing so noticed that on the Natwest mortgage calculator they have an option for the mortgage type "existing borrower - ending mortgage early" which would be what I would be doing and they have a rate of 5.09% for 90% LTV 2 year Fix which even with the £999 fee included changes my monthly payment from £842 per month to £777.

I was just wondering if this was the done thing changing mortgage deals when you are still fixed into a deal if the rate is better and if there is anything I need to be careful of as the figures from the above seem like a no brainer for moving to a new deal?

Thanks,
Dan

_Andy_

Sounds like you haven't factored in early repayment charges.

dan_l

Are these still applicable even when staying with the same lender?

opinions4u

dan_l wrote: »

Are these still applicable even when staying with the same lender?

Yes, they are.

dan_l

Is that definately always the case? I have just seen this on Nat Wests website

Early repayment charges are normally only payable if you are looking to repay your mortgage in full and you are still within your initial deal period e.g: year one of a two year fixed rate, and you are not taking out another mortgage product with NatWest.

I'll give them a ring later to double check when I've finished work and let people know the outcome.

JimmyTheWig

Generally they still charge you the ERC, but check with them.

Note that the new fix will finish a year before the old fix. What rate would you then move on to? What do you think might be happening to interest rates then? Could you afford it in two years time if they have shot up?

What's your mortgage balance?

What you haven't considered is that by adding the £999 fee to the mortgage, in two years time you will owe more than if you hadn't switched.

35 years is an awfully long time to be paying off a mortgage. Will cost you a fortune in interest.
If you do switch, or even if you don't, have you considered reducing this term or overpaying at all?

dan_l

JimmyTheWig wrote: »

Generally they still charge you the ERC, but check with them.

Note that the new fix will finish a year before the old fix. What rate would you then move on to? What do you think might be happening to interest rates then? Could you afford it in two years time if they have shot up?

What's your mortgage balance?

What you haven't considered is that by adding the £999 fee to the mortgage, in two years time you will owe more than if you hadn't switched.

35 years is an awfully long time to be paying off a mortgage. Will cost you a fortune in interest.
If you do switch, or even if you don't, have you considered reducing this term or overpaying at all?

Hi,

Thanks for the reply, my current mortgage finishes October 2nd 2014 so say I took this mortgage and it took a couple of weeks there would only be 8 months difference in when they end.

What initially brought this to my attention was I was looking into overpaying so I'll be doing this anyway. In hindsight I wish I had of fixed for 2 years with interest rates staying so low but at the time I was worried about them going up and house prices going down leaving me in a bad position when it came to remortgaging.

Thanks for the help.

JimmyTheWig

Thanks for the info, Dan.
Only question, then, is the outstanding mortgage balance. This is relevant in terms of whether a 0.9% drop in rates for two years is worth the £999 in fees. Are there any other fees?

dan_l

JimmyTheWig wrote: »

Thanks for the info, Dan.
Only question, then, is the outstanding mortgage balance. This is relevant in terms of whether a 0.9% drop in rates for two years is worth the £999 in fees. Are there any other fees?

The outstanding balance is £145000.

I have just had chance to speak to NatWest about the ERC and the person initially said it was applicable even when moving to another NatWest mortgage, then I pointed him in the direction of the website and then he had a look and wasn't sure, then checked with somebody else and came back and said that on the website only applied to if you are moving house, although I don't see that mentioned anywhere on the site so it is a bit misleading.

If anybody wants to have a look - http://www.natwest.com/personal/mortgages/g4/common-questions.ashx#what_is_the_early_repayment_charge_for_my_mortgage

Thanks,
Dan