Any way out of early repayment fines??

Meeshy88

Hello everyone.. Looking for some advice re early repayment fines..

We are currently locked into a 5 year fixed mortgage deal at 4.79% until 2018. However..we are wanting to move home to a bigger property but don't want to increase out monthly mortgage payments.

We have been offered a deal of the full amount we want to borrow at 2.99% meaning that although we will be borrowing apprx £50,000 extra that we currently owe, our monthly repayments will be pretty much the same. This is also over the same term as our current mortgage.

When i contacted our current provider, they will lend us the extra but on a second deal meaning our monthly payment goes up by apprx £200..

So it seems like our cheapest monthly option is to come out of our current deal, pay the £6000 early repayment fine from our (little) equity and go with the brand new deal at 2.99% ..problem is we cant decide whether this is a good or bad decision!!

Please advise!!

Thrugelmir

When you say offered? Have you made a full application or just made an enquiry.

To make a reasoned comparison you would need to give some figures.

stator

Would the top up mortgage be for another 4 years? If so £200 per month * 48 months = £9600 which is greater than the fee of £6000, so on paper it would be worth paying it.
But do you have £6000? If you had to borrow the money and pay interest the sums would be different.

Meeshy88

Hi both.

Offered as in worked through their eligibility criteria and looked at what products they would offer us..we haven't applied as we havent got or house on the market yet.

The top up mortgage would last the same term as our current one (33 years remaining) . We would have to pay out the £6000 from the equity in our current property..we owe £121,000 and the house is worth £153,000.

Thankyou!

dimbo61

So at the moment you have £32,000 equity and £6,000 ERC.
You want to buy a £200,000 property with £30,000 deposit (15%)
Hope you have the spare cash to pay buying and selling costs say £10,000 and £6,000 erc.
The new deal has a £995 fee ?

Meeshy88

We'd be looking at properties between £175k - £195k with a plan of putting 10% deposit down and using the cash left over for fees...but this 6k means it would eat into that substantially!! Which is what is putting us off making the leap..

No there is no product fee

Thrugelmir

Who is the lender you are considering?

username1988

Now signed in under different account..

Its with the Post Office..its a fixed 2 yr deal.

GMS

Why pay £6,000 to come out of a deal and only protect your new rate for 2 years?

You would revert to 4.49% after 2 years. Have you considered a longer term fixed rate to lessen the impact of the ERC payment?