pay off mortgage or not

JC2005

Hi I have a fixed mortgage for another 2 years to run until end of that deal.
I have about £110000 left to pay with payments of £723 a month. There is an
early repayment clause which amounts to about £5000. I was left a house
which I have sold and now have enough money to pay off my mortgage.
I was hoping someone would be able to tell me should I pay it off or wait
2 years and wait until there's no penalty to pay. Cheers

mr-bob_2

Interest rate?

Can you overpay any without penalty?

Simply work out the interest for 2 years and see if its more than 5k or not. Account for overpayments you can make without penalty too.

JC2005

The interest rate is 4.9% and I can have overpayments of 10%. Thanx for your time.

getmore4less

It gets a bit complicated to optimise.

can you over pay without penalty.
can fix the regular payment
can you shorten the tern(whats the cost)

if you overpay with penatly make sure the penalty is paid seperate to the overpayment.

The optimum may be reduce term to increace the regular payment(fixed at a high level), overpay and then finish with the increased payments over a few months

JC2005

I will phone bank and ask.

dimbo61

You can phone the bank but do not be surprised if they cannot answer your question!
Ask can you reduce the term to 2 years? It cost me £50
Then pay whatever the new mortgage payment is each month until the 2 years have finished.
£5000 is a lot of money to pay the bank when you only owe £11,000 and I would sit tight and wait for the end of the term if you cannot overpay

JC2005

I wish it was £11000 it's £110000. I'm not sure if the bank would give me the best advise or not, but will try them and see. Cheers

JC2005

As far as I can see using the moneysavingexpert calculator I would need to be getting savings rate of 6.1% otherwise I should just pay of the mortgage ( even if I have to pay the penalty of £5000 ) and I don't think it's possible to get that rate. Am I right saying this or am I getting it all wrong. Cheers

getmore4less

the problem is the calculator does not do the job properly.

You need to get the info asked for to work out the optimum way to do it.

one other thing to add to the list is the exit fees if the mortgage finishes before the end of the term.

bigadaj

You could theoretically do better investing the money but that would be moderate to high levels of risk so most people would be tempted to pay it off.

One option might have been to rent out the inherited property as the yield on this could exceed the mortgage rate on your current house, however sounds as if you have sold already and there would be hassles and yield would depend ona number of factors.

Id pay the mortgage off if I were you.

Thrugelmir

JC2005 wrote: »

I wish it was £11000 it's £110000. I'm not sure if the bank would give me the best advise or not, but will try them and see. Cheers

Not the banks role to advise you.

On what basis is the early repayment charge calculated?