Remortgage before fixed rate ends and incur penalties?

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Hi all,
I’m not that knowledgeable with mortgages, having owned my flat for 6 months. I know the basics, so I’m just feeling out an idea here rather than talking about it with any degree of seriousness – wanted feedback from others to understand my situation more and just learn a bit more about mortgages in general.

I saw an email on hotukdeals a month or so ago regarding a Barclays 10 year fixed mortgage:

http://www.hotukdeals.com/deals/10-year-fixed-rate-mortgage-2-99-999-fees-woolwich-from-barclays-only-20-deposit-2201401

Now, I am not at a point I can remortgage without any penalties. However, I would like to know whether I should look at the possibility of switching as the long term deal is enticing, or whether I’m insane for thinking this due to the penalty costs incurred. If it doesn’t seem like a sensible option, at least I’ve learnt a bit more

The facts:
-Bought a flat in December 2014 for £175k. Mortgage was £148.75k @ 85% LTV.
-Am on a fixed 2 year mortgage with Halifax till Nov 2016 @ 3.69%.
-Halifax was pretty much the only bank that would lend me enough, as my income is wage + annual bonus, but annual bonus varies. Some banks only lent based on my wage, not getting me close to the amount I needed, and everywhere seemed to handle the bonus differently if they did factor it in. Halifax handled it in a way which would lend me enough.
-I have a pay rise incoming in the next two weeks that will hopefully negate the above point (I don’t know what my pay rise is at the moment, but let’s assume it’s enough).
-I have roughly £8000 in savings.
-I intend to overpay on my mortgage when in a position to do, regardless of what mortgage I’m on.

So with the above facts, the first thing I have to think about is that my current mortgage is 85% LTV and the Barclays one is max 80% LTV. So I have to make up the difference + pay the £999 fee. This can be achieved, but it would wipe out my savings.

The next thing I looked at is monthly repayment. I would go from £622.44 to ~£529.59 (without factoring in penalty fees, see below regarding that) at their respective interest rates. That’s saving about £93 a month. The true impact of this is difficult to deduce, because it depends how often I switch after my current mortgage fixed period ends, what the new interest rate is, what the product fee is, etc. etc.

This is all well and good, but the issue is the penalty costs incurred. I don’t actually know what they are, I’m at work and my paperwork is all at home. Halifax’s worked example from their website uses 5% so I’m going with that. The penalty costs would therefore be ~£7500.

The questions I have are:
1. The penalty cost incurred, is this something I have to pay for out of my own pocket when moving products, or does it get added to the cost of the mortgage?
2. Is my train of thought here sound, or am I totally loopy for thinking about putting 5% more on the cost of my mortgage? Should I just wait until my fixed period ends and look then?

I have the EU mortgage legislation and the low base rate of 0.5% in the back of my mind here, hence why I would even consider this. I also don’t know how good this Barclays deal is - if these kinds of deals are frequent then I'm better off just waiting until the fixed rate ends and go remortgage hunting then.

I appreciate any help with this, as mortgages are a minefield for me!

libf

At £7500 to get out of the current mortgage I'd wait until next year. Personally, I don't think interest rates will have risen much (if at all!) by then.