Advice needed. Paying a lump sum or not?

bandd123

Good afternoon everyone, I was wondering if someone out there could help.

We’ve had our mortgage with HSBC since October 2012. We borrowed £297.000, at 4.99 fixed for 2 years. Our payments have been £ 1735 per month but as we took advantage of the fact we could pay an extra 20% every month, we have increased our payments to £2081 since September 2013.

In October this year, we will go back to variable rate of 3.94% reducing the payments to £1558.

We will have £279.000 left to pay in October.

Now, we are also in the process of selling our BTL flat, expecting to make a profit £80.000.

My questions are:

- Are we better off paying a £80.000 lump sum from our mortgage?
- Is it more financially sound to increase the monthly payments instead. And how much by?
- Should we remortgage with a better interest rate?
- Should we reduce the term?

I am not mortgage savvy and don’t know where to start, there is so much information but unless I use my example, I can’t make up my mind…

Our plan is to pay off our mortgage as quickly as possible but also try to keep our monthly payment around the £1500 mark, if possible as we have now got a son!

We do have money on the side in case of a “crisis”, so this question is only about the mortgage. I hope I have given you enough details.

Thanks very much for your help!
Bandd123

getmore4less

If you pay before Oct you will have to factor the ERC.

Still max out the payment till then.

If you wait till OCT so no penalty if you don't need the money for anything else why not reduce the debt.
better than trickling it in with a higher payment.

Also look at what rates you can get with the better LTV.

TrickyDicky

You havent said what your equity is. HSBC trackers allow unlimited overpayments, and the best one is at 1.49% + base (currently 1.99% total). You can pay either a £1999 fee, or open an HSBC current account and pay a £99 fee (then close the current account). This option requires 60% LTV though.

There are other trackers with HSBC at different % LTV. Im not sure about swtiching between mortgage types, but if you stay on a tracker you can change the rate by ringing them up and signing a new agreement (and pay the fee), no need to go through another credit check assuming nothing other than the rate changes. We've done this 4 times now (first change £499 fee, followed by two changes at 0 fee, then the £99 fee above).


Try giving them a ring and asking them if you can swap types (you may need to go through a whole new re-mortgage aplication though).