Considering a 10 Year fix - Thoughts?

Wirenth

I'm also looking closely at this one, quantumleap. The ERC apply to overpayments above 10% of the initial balance. So, there is nothing to stop you doing some overpaying. The bit that attracts me is that, OK it may take several years for the BOE base rate to push mortgage rates above 3.59%, but I reckon this fix won't be around after next summer.

Wirenth

Just doing some sums for my mortgage, quantumleap. I owe £98,500 with Santander on 2.49% lifetime tracker, no ERC, remaining term ~28 years. The monthly payment is currently £409.20 and I'm overpaying more than £600 every month.

With the Nationwide 3.59% 10 year fix, the repayments would be £465.17, if I kept the term at 28 years.

If I wanted to try and pay my mortgage off in 10 years, the monthly payments would be £978.18. Considering that I'm currently overpaying by £600, this looks doable.

The Nationwide mortgage allows 10% overpayments of the initial balance without ERC being applied, so long as the mortgage isn't finished before the fixed portion of the term.

So, I could take out the 10 year fix, but overpay, so long as I don't overpay more than £9850 in any one year. It just depends on how quickly the rates rise 1.1% and how quickly Nationwide would take this fix off the market to determine whether or not it would be worth it for me....And I could conceivably end up mortgage free at the end of the 10 year term...

JimmyTheWig

Wirenth wrote: »

Just doing some sums for my mortgage, quantumleap. I owe £98,500 with Santander on 2.49% lifetime tracker, no ERC, remaining term ~28 years. The monthly payment is currently £409.20 and I'm overpaying more than £600 every month.

With the Nationwide 3.59% 10 year fix, the repayments would be £465.17, if I kept the term at 28 years.

If I wanted to try and pay my mortgage off in 10 years, the monthly payments would be £978.18. Considering that I'm currently overpaying by £600, this looks doable.

The Nationwide mortgage allows 10% overpayments of the initial balance without ERC being applied, so long as the mortgage isn't finished before the fixed portion of the term.

So, I could take out the 10 year fix, but overpay, so long as I don't overpay more than £9850 in any one year. It just depends on how quickly the rates rise 1.1% and how quickly Nationwide would take this fix off the market to determine whether or not it would be worth it for me....And I could conceivably end up mortgage free at the end of the 10 year term...

I've got two comments on this...
1. The 10% overpayment per year is (at least with Santander) 10% of the balance at the start of that year.
So you could overpay by £9850 in the first year but only overpay by £8621 (in your case) the second year.

2. If you are paying off your mortagage in 10 years, your balance will be abouhalf what it is now in 5 years time. Which means interest rate rises won't have much of an impact on you.
You would probably be much better off going for a cheaper 5 year fix now while your balance is still relatively high and then (probably) paying a higher interest in 5 years time when your balance is low.

quantumleap

JimmyTheWig wrote: »

I've got two comments on this...
1. The 10% overpayment per year is (at least with Santander) 10% of the balance at the start of that year.
So you could overpay by £9850 in the first year but only overpay by £8621 (in your case) the second year.

2. If you are paying off your mortagage in 10 years, your balance will be abouhalf what it is now in 5 years time. Which means interest rate rises won't have much of an impact on you.
You would probably be much better off going for a cheaper 5 year fix now while your balance is still relatively high and then (probably) paying a higher interest in 5 years time when your balance is low.

This is good advice. I didn't consider that in 5 years time my balance will be considerably lower, so the impact of rates being a little higher will be less. An important point that I think has persuaded me to run with the 5 year fix.

JimmyTheWig

quantumleap wrote: »

This is good advice. I didn't consider that in 5 years time my balance will be considerably lower, so the impact of rates being a little higher will be less. An important point that I think has persuaded me to run with the 5 year fix.

And is even more pertinent for Wirenth than for you, as they are looking to pay their mortgage off in 10 years and you are looking to pay yours off in 15.
The shorter the time left to repay in full the lower, proportionately, the balance in 5 years time.