New borrowing - to remortgage or not?

BlueC

Hi, just looking for some advice or an extra brain or two as my head is hurting with this!

We are looking to take some new borrowing for significant home improvements (adding a new bedroom and bathroom). Our current repayment mortgage has 3 years and 2 months remaining fixed at 4.59%. The monthly repayment amount is almost exactly £700.

There are now better rates available - we can fix for 5 years at 3.49%. So there are two options I am considering - take just the new borrowing at the new lower rate, or pay the redemption fee and take the entire lot at the new lower rate. Which is better for us financially? I can't work it out!

Some figures:

Current mortgage: £700 per month
Redemption fee: £2496 ouch but we can afford this

Current borrowing at new lower rate: £630.42 per month
New borrowing at new lower rate: £178.12 per month

Over the remaining 38 months of our existing mortgage, if we took the current borrowing at the new rate we'd save £2660 in repayments, so this would be more than our redemption fee. Seems to be the best choice?

But another thing struck me, we can easily afford to keep paying £700 per month plus the additional new borrowing at £178.12 per month, so if we took the new lower rate we could still pay this amount and in effect pay off £2660 of extra capital over the 3 years. So this seems to me to make it an even better choice?

Have I got this right? Does anyone disagree? Am I barking up the wrong tree?

(FWIW I don't want to take a SVR, offset, or any other type of mortgage, we are risk averse and happy with fixing for 5 years on a repayment mortgage!)

Thanks
Chris

Crashandburn

You'll be needing to give people a bit more information if you are looking for a reply.

The information they would need is things like current balance outstanding, money needed for the significant home improvements and the term remaining on the mortgage (not the term remaining on the product). Once they have this, then people be able to see what the £700 per month is actually doing.