Do we change from fixed 5.99%?

Vic5

Hi all,

We have over 3 years left on a 10-year fixed rate at 5.99%. We've been thinking for a while about paying the ERC to come off it and now even more so since HSBC announced their 1.99% 5-year fixed rate.

I'm after some advice from someone who is able to understand these things more than me because I'm really not sure if changing mortgages (and lenders) is worthwhile.

We had about £132,000 left to pay at the beginning of the year and about 21 years. The ERC is £5360, which we would have to add to the mortgage. We're currently on 5.99%. The HSBC 1.99% sounds great but the £1500 fee would have to be added to the mortgage as well.

Are there any other fees associated with changing lenders? We're currently with Halifax.

Any advice would be greatly appreciated.

Many thanks.

Jon_B_2

Well if you switch and you don't make overpayments you'd save circa £8.5k compared to what you are paying now, so taking the ERC into account, you'd be nearly £3k better off after 3 years which is what is left on your existing mortgage.

Your monthly payments would be £280/month less. Imagine the overpayments. You'd clear the mortgage in no time.

For me, no brainer here.

Jon_B_2

By the way, I'm no expert, but there are some great tools on MSE site if you take 5 seconds to look. I used the "compare two mortgages" tool

ACG

How much a month are you going to save?
I cant see you being financially better off paying nearly £7k in fees.

Vic5

Thanks both. I'll have a look at the calculator.

We'd be saving roughly £300 a month. Just not sure if there were any other fees I'd not thought about...

Vic5

Actually, it might be less than £300. I don't think I included adding the fees. Was hoping we wouldn't have to.

andyfromotley

Its marginal,

Of course you reduce your monthly payment considerably. But you have of course increased your overall debt significantly.

If you paid all of your savings as overpayments i think you win. (although less so if you also have to pay sol and valuation fees) It may be better to look at a slightly higher rate but with low or no fee which may make the figures swing even more in your favour?

It is really just a case of crunching the numbers with lots of different products. I suspect that the 1.99 may be hard to come by as they will be pretty tight with it?

RavingMad

Hi Vic5, the HSBC rate of 1.99% is for people with 60% LTV, so they would have to value your house at approx 235k. Apologies if you already knew this and it's not a problem

getmore4less

It makes no difference if you add the fees or pay them.

It is easy to do the basic comparison.

Add the fees make the payment the same and see how much you owe in 3 years.

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

£132k 21 years 5.99% is around £922pm.

lets go for £920pm

£132000 5.99% £920pm in three years £121730
£138860 1.99% £920pm in three years £113295

in 3 years £8400 better off even adding the fees.

lets look at another case.

say more fees total £8k

£132000 5.99% £920pm in three years £121730
£140000 3.77% £920pm in three years £121728

so with up to £8K fees ANY rate below 3.77% over the 3 years you will be better off.

(Subject to your real numbers being close to £132k £920pm)

once you decide the payment you can ignore the term it is no longer relevant to the comparison.

gazter

RavingMad wrote: »

Hi Vic5, the HSBC rate of 1.99% is for people with 60% LTV, so they would have to value your house at approx 235k. Apologies if you already knew this and it's not a problem

And hsbc have some of the tightest lending criteria out there. That credit history needs to be squeaky clean...

getmore4less

lets look at another case.

If you can find a fee free, fees paid transfer

say total no more than £6k

£132000 5.99% £920pm in three years £121730
£138000 4.31% £920pm in three years £121723