Which way to go?

lexington013

Hi, any advice from you specialists would be really welcome.
I currently have a capital repayment mortgage of £170,000 over a 20 year term fixed at 5.8% (10 year fix but down to 6 years now). ERC charge is 5% (so circa £6500). I have savings of £51,000, and currently OP my mortgage by £500 every month off the capital
WHAT WOULD YOU DO?
Should i remortgage to an offset paying the ERC?
Continue to OP and cut the mortgage by circa 10 years?.
Continue to overpay until year 6 pay no ERC and then remortage?
My savings give me around 3.4% before 20% tax

Thanks.

The_J

Like for like I think that remortgaging to a standard 5 year fixed rate and paying the ERC would save you at least 4 grand in the 4 years you have left. If you were to go with a 3yr fix offset (for example First Direct) you could save about £5.5k in the 3 years, clearly there are then 12 months we cannot compare, rates could be higher at that point but assuming they are not it looks like it is worth jumping ship.

With that amount to offset you should be able to do some serious damage. Personally, I would go for it but this is not advice, nor am I recommending a lender. If you require either of those, speak to a professional.

Thrugelmir

OP by the maximum allowed every month.

Better return than you'll get on your savings.

I would use some savings to fix in longer term ISA's, to co-incide with end of current product term. Then once free of ERC repay lump sum.

Darkstar

I am in a very similar situation to you and used Martin's ditch that fix calculator to discover it was not worth it for me. Since I can make 10% overpayments I am using my savings to Max out overpayments and get my term down as fast as I can. However your fix is considerably higher than mine so it may be worth you ditching.