Is re-mortgaging mid way through a fix worth it

devildolly5

Hi

We bought our first house last Feb with Nationwide's save to buy mortgage. We purchased the house for £250K. The house was valued between 250-280 at the time. It was a private sale and stamp duty rates were per the old system so we were able to buy at the lower valuation.

We are currently on a rate of 5.89% and 1 year through a 4 year fix. We owe £232K on the mortgage and house prices in our area are around £300K for similar properties.

I just wondered if it is possible to end a fix early and try to remortgage on to a better deal as our LTV has potentially changed? We also have the option of putting some more cash into the property to make the LTV even lower.

I have no idea if this is even possible. If it is, do we apply for another mortgage and then they do another valuation and see if they would lend to us. Obviously we need to look into any costs related to ending our deal early, but I just wanted to know if this is even possible. What is the process as we have never remortgaged before. Do we need to get a cost from Nationwide about how much it would cost to leave early?

Is it best to go to a broker for this?

Any help or advice appreciated.

amnblog

This is rarely a good idea, but the mathematics might work on this one given that there are 2% rates available.

The smart borrower will engage a broker.

AFK_Matrix

I would read your mortgage T&C's as there may well be an Early Repayment Charge (EPC). This could be quite a lot of money as your only a year in, we're talking in the thousands here. I know I have an EPC on my fixed mortgage hence me waiting to remortgage and I'm on 4.99% fixed.

benjus

I think it could be worthwhile. ERCs are typically about 2%, which would be £4640, or about £130/month amortized over the remaining 3 years of the fix.

Your current repayment is about £1360, right? So if you can get the monthly repayment below about £1225, you're better off.

So based on these figures (which of course you would need to confirm) I make it that at 4.95% you'll break even over 3 years, based on adding the ERC to the new mortgage, then making overpayments to pay off the ERC over 3 years. Anything less than that will save you money.

devildolly5

Thanks all.

Benjus, we are actually paying £1514 a month. I had a quick look at it looks like Nationwide will charge 3% ERC. I did some quick sums and I still think we would be better off but thought I'd check with those more knowledgeable.

Roughly speaking -
Now 3 years left at 5.89% £1514 a month = £54,504

If we leave fix 3 years at 2.5% (for example) = £1100 (ish) = £39,600 + ERC @ 3%(£6960) = £46,560

Saving about £8000 over 3 years if my sums are correct.

Thrugelmir

Can you get a rate of 2.5%? If you owe £232k and the property is worth £300. Your LTV is still over 77%.

Don't forget to factor in potential remortgaging costs. I.E. legal fees, valuation fees, product fees and mortgage exit fees. Can soon mount up.

How will you fund the ERC. Borrow the money and add it to the mortgage? This will incur you interest and also impact the LTV.

To reduce the LTV and save interest. Start overpaying now by much as you are able.