Mortgage dilemna

arian£££

I have 18 months to run on a 2.5% fix with unlimited overpayments.

two options:

1) take up an offer now for a 5 year new fix at 2.5%. 10% max overpayments payment pa, with 5/4/3/2/1 percent penalty for redeeming in each year respectively. Porting allowed. Term 12 years - I expect to clear balance in around 5 to 7 years. No fees.

2) stay on currrent deal for 18 months and take new mortgage (unknown rates) in March 2017 ?

Thoughts welcome.

lee111s

What's the ERC for your current mortgage?

arian£££

There is no ERC on the current mortgage

getmore4less

Lender(s)

any fees.

unusual to have no penalty on a fix.

what does the rate change to in 18 months.

arian£££

Currently with Coventry - moves to standard currently 4% I think at end of the term. I have overpaid around £22k in last 3.5 years

New mortgage Halifax - no fees. I got the offer in April - would need to take up by end of Sept.

I would prefer to keep the flexibility to make unlimited overpayments as there is a very small risk that circumstances may change in a few years and I would need flexibility and be annoyed to be hit with the ERC.

Most likely is that I will be in the same property in 5 years and will use the 10% pa overpayment and then pay off the lump sum after 5 years leaving a very small balance or even clearing it.

If I maintained the full flexibility, then I do not want to be remortgaging in March 2017 and pay more when rates are not as favourable as they are now. .

Mortgage is £85k

All the paperwork is ready to return to remortgage with Halifax - welcome views whether this is the best plan or wait and take pot luck in March 2017?

I guess I am prepared to pay a small premium for flexibility, but also do not want to pay more than c2.5%!

getmore4less

March is 20months.

looking at 5years £85k
rate Payment.....interest paid
2.5% £1509pm £5512
2.5% £1509pm £2760(18m)+
4.0% £1550pm £4438(42m)

How much will you overpay in the 18 months if that's where the bulk will be then the interest on what left will be lower.


If you want to be sure of 2.5% then that pushes you to take that fix or look for a better deal.

when does the potential for the erc become an issue
aprox erc on the 5 years on a 5y repayment schedule
5 £4200-£3400
4 £2700-£2100
3 £1600-£1050
2 £700-£360
1 £180-£0


if flexibility is needed then the fix may be a problem

dimbo61

So you have overpaid about £500 a month.
I am sure you could continue this if you moved to Halifax for the first 3 years of the five year deal without ERC, s
If you have the ability to make the full 10%.overpayment in the first year £8500 then your balance at the end of the five year term with 10% overpayments each year would be very low.

arian£££

Thanks getmoreforless - I get the principles, but don't understand how you calculated the monthly amount - plus of course it's very likely that the 4% will grow as rate rise as this isn't fixed!

I am considering overpaying up to the 10% each year for the term, so expect the amount left after 5 years to be low.

Question is if I wait until March 2017 and remortgage for say 3 years (to March 2020), will I get a better than 2.5% rate now that I can guarantee to June 2020?

I am currently included to go for the new mortgage and overpay the 10% each year and take the risk on the ERC if situation changes (unlikely as I say).

getmore4less

Just stick £85k on a 5 year term to get the monthly amount.

The result will be different if you do a longer term with non regular overpayments.
I needed to model something to do some numbers 5 years seems to be a goal you have.

my opinion the chances of a rate rise are a bit higher than a drop, as this is a no fee switch and you are going to try and get as close to a 5 year term as possible with overpayments any rate rise at the end of the 5 years will end up being on a small amount so not that relevent.

arian£££

Thanks - for clarity, term is 12 years

getmore4less

That just sets the minimum contractual payments, actual term is determined by the payments.

If the goal is 5-7 model on that not 12.