Is It Ever Worth Switching In The First Two Years?

Gaz83

Bought my house last year, £120,000 with a deposit of £6,000, so LTV was 95% (borrowed £114,000). APR is 5.59%, so I'm paying £650.70. We're with the Halifax.

Been overpaying a good chunk this year, so I estimate that after our twelfth payment (December) we'll owe about £109,000. Given that house prices in our area have risen a wee bit, and we've put a new boiler in, I'd estimate (based on similar properties) that our house is valued at about £123,000, meaning we've £14k equity in the property.

Is it ever worth switching in the initial two-year period in order to try to get a better APR? Or would any benefits in monthly payments be wiped out by early settlement charges and new set-up costs?

Thanks for any general advice.

ACG

How much will your ERC be? Im assuming it will be in excess of £1k?

If you switch products will you save that amount?

Armorica

Work out your LTV - APRs are usually tied to this e.g. are you below 90% now? And it will depend on the size of any exit and set-up costs

amnblog

It is unlikely the mathematics will work out. You will probably pay at least 3% to save not more than 2%.

kingstreet

5.59% is the notional rate, to which fees are added. It isn't the APR, so please stop using the term as it is irrelevant to mortgages as it assumes the standard variable or follow-on rate remains the same for the remainder of the mortgage term after (in your case) the two year fix ends.

The early repayment penalty appears to be 3% in year one, 2% in year two, so £109,000 x 2% means a redemption figure of £111,200.

Your property value will be based on the recent (last four months) sales of similar property in the vicinity (less than 0.5 miles) so look here;-

http://www.rightmove.co.uk/house-prices.html

for the comparables the new lender's surveyor will use.

Assuming your valuation of £123,000 is accurate, that means the loan to value remains more than 90%, so you will end up paying the early redemption penalty and getting a rate similar to what you are already paying.

So;-

Is it ever worth switching in the initial two-year period in order to try to get a better APR? Or would any benefits in monthly payments be wiped out by early settlement charges and new set-up costs?

the answer is possibly, but not in your case at this time.

Gaz83

Thanks very much for the advice, all. To be honest it's as I expected.

I will keep trying to overpay for the next year and hopefully be in a position where I can approach my broker next December looking for an 80%-85% mortgage.