2 Year Fixed Rate - Is this a plan (or what)!!

Korkyb

Hi all

Hoping to have most of my mortgage paid off by December 2017.

I have around 63K outstanding and current 5 year fixed rate runs out end Sept this year.

LTV is around 35%.

My endowments are due to mature in Dec 2017 and I should be able to make around 10k- 15k overpayment this year (this is a one off - wont happen again).

Planning to take out a 2 year fixed rate to see me up to just before the endowments maturing.

I have arranged a First Direct mortgage - No fees & 1.59% over the 2 years.

As there are no fees involved I could cancel this if anything better comes along in the meantime.

Should I be looking elsewhere or is this as good as it gets.

Does my cunning plan have any holes. I havent sought financial advice....... or at least this is me seeking advice from you chaps :-)

miketaff1408

You need to check how much you can overpay without penalty with the FD mortgage. It is usual for a max of 10% overpayments to be made in a year, which means 17k of overpayments on a 63k mortgage would exceed that.

You need to work out whether the savings made on this mortgage and then paying this penalty would be less than if you put the money into a SVR or another mortgage product which would allow unlimited overpayments, but obviously would probably attract a higher APR.

miketaff1408

Korkyb wrote: »

I have arranged a First Direct mortgage - No fees & 1.59% over the 2 years.

As there are no fees involved I could cancel this if anything better comes along in the meantime.

Are you sure there are not exit penalties from this mortgage?

No fees means you don't pay any upfront fees. I don't think it means you can switch mortgage in the fixed rate without penalty.

Korkyb

I've been told by FD that I can overpay my current mortgage as much as I want without penalty. (I'll double check beforehand to make sure of course).

The one thing at the back of my mind is if it might be better to keep the overpayment funds in my Santander 123 current account earning 3% (before tax).

Sorry - reading back my original post I wasnt clear at all - I havent actually begun the new 2 year fixed rate deal yet - it will kick in when my current 5 year deal ends in August this year. Once it starts there will as you say be exit penalties.

dimbo61

Is your deal a 2 year tracker or fix ?
If you can overpay by 10% this year and 10% next year.
When your deal runs out and the endowment matures then just pay that off the mortgage. You should be on the SVR by then

Korkyb

The new deal is 1.59% 2 Year fixed.

I contacted FD & they have said there are no limits / charges on overpayments on either my current 5 year Fixed Rate or on the 2 year one which will take over from it in August.