Ditch fixed rate mortgage?

MoneySpendingExpert888

Hi there was just wondering if anybody is able to offer advice on the fix rate mortgage that a family member currently has and if they should pay the early payment fees to get out of their mortgage:

originally took out a £157,500 - 5 year fixed at 2.99%

now remaining £150,000 - 40 months at 2.99%
exit fee is 5% which would be about £7,500

house value has risen now which means if they took out a £150,000 mortgage then it would be 60% LTV, which also seems to be able to get them the best rates at the moment. e.g.

Yorkshire Building society 1.18% fixed for 2 years.

SET-UP FEES BREAKDOWN
Booking fee:£130
Arrangement fee:£1,369
Valuation fee:£235
Other fees: £24
Cashback:£0


MSE Total Cost £7,030 for year 1

any advice appreciated

Thrugelmir

MoneySpendingExpert888 wrote: »

Yorkshire Building society 1.18% fixed for 2 years.

And the follow on rate? Heavily discounted rates normally revert to something much higher.

MoneySpendingExpert888

the follow-on rate is 4.99% after the 2 year period.

although i found the same deal with HSBC but with 3.94% followon rate. thanks for the quick reply thrugelmir

getmore4less

does this pass the smell test £9k of fees to be paid back in 2 years
£150k 2.99%-1.18% is £5400 over 2 years so not a chance.

Simple calcs add the fees make the payments the same and see whats left.

you don't give the full term but can guess that.
£157500->£150k in 20 months is around 25y full term

lets say 23y left now.(only set the payment so not critical)

http://www.whatsthecost.com/mortgage.aspx

1. £150k 23y @ 2.99% £753pm

add the fees, £7500 + £1758

2. £159258 23y @ 1.18% £660pm

first trigger point is 2 years , make the payments the same(£753) and see whats left after 2years

1. £140633
2. £144782

Switching is £4149 more expensive over 2 years.

there will still be time left on the current deal @ 3.99% so a new deal may be possible to fill the gap with something that can recover that and save more no ERC this time.

I would review again when the ERC drops a level(is that at the 2y point in 4 months?). Still looking tight, 2.99 is not that bad a rate

YBS also have a 3y fix @ 1.84% with fees £845 (£524 less)

after 3 years
1. £135735
2. £138888

Still £2953 behind.

MoneySpendingExpert888

Hi GM4L,

thanks alot for doing that calculation for me, i was trying to work my head around the same thing but was getting totally different figures lol

saved me a good few hours of maths there :T

I really only thought about it because of the generalization that mortgages rates are pretty low at the moment and a lot of people seem to be switching. but i guess those might be the ones who were on 4%+ rates

so based on your advice, it would be best to leave the mortgage as it is until the full term has passed?

getmore4less

it is relatively easy once you realize that if you normalize starting point and payments the only thing that matters is whats left of the debt at some point in the future.

Add the fees and make the monthly payments the same and see whats left month by month.

getmore4less

MoneySpendingExpert888 wrote: »

so based on your advice, it would be best to leave the mortgage as it is until the full term has passed?

Review at the next drop in ERC.

Start thinking about options when the 5 years are up.