Should we remortgage even with the 3% ERC

nakiwala123

We took out a save to buy mortgage in June 2013 with the nationwide and we got one of their 5% deposit products. We took out a 4 yr fix at 5.49% and we borrowed £217k. Our monthly repayments are at £1232. We make about £100 per month overpayments and are up to £1400 in overpayments so far.

We bought the house for £232k.

2 similar houses on our rd recently sold with the most recent for £265k in May 2015 so we are assuming ours should be worth about the same. Which gives us equity of just over 20%.

At the moment we have an outstanding balance of £208k.

My main question is with the nationwide ERC at 3% which would be about £6240. Are there any products on the market that would make it worth switching even with this hefty fee?

We would have to add this fee to the overall amount borrowed.

Can a clever person please help me calculate whether it would be worth it to switch. We have 20 months left on our current mortgage.

I am mindful that some low rates available have a high fee which could deplete any savings we could make from remortgaging.

What other factors should we consider?

getmore4less

I can do it tomorrow.

what you do is get a simple calculator stick in you mortgage, workout what will be left at the end of your fix.

add the fees and work out what interest would give the same final number for the same payment.

Thrugelmir

Other factors to consider are the possible costs of remortgaging. Legal fees, valuation fees, product fees, mortgage exit fees for example.

Once you have the full picture then meaningful comparisons can be made.

getmore4less

outstanding £208k 20 months

£208000 @ 5.49% £1323pm £200052

erc £6240

£214240 @ 3.60% £1323pm £200054

add another £1k/£2k of fees

£215240 @ 3.30% £1323pm £200045
£216240 @ 3.01% £1323pm £200066


Gives an idea of the rate you have to hit to break even before the current ERC goes completely.

Does this reduce in the interim might be worth waiting till the next drop

if you think rates are rising then a change now might secure a better rate than in 20 months(or 8 if the ERC changes on annual).

nakiwala123

getmore4less wrote: »

outstanding £208k 20 months

£208000 @ 5.49% £1323pm £200052

erc £6240

£214240 @ 3.60% £1323pm £200054

add another £1k/£2k of fees

£215240 @ 3.30% £1323pm £200045
£216240 @ 3.01% £1323pm £200066


Gives an idea of the rate you have to hit to break even before the current ERC goes completely.

Does this reduce in the interim might be worth waiting till the next drop

if you think rates are rising then a change now might secure a better rate than in 20 months(or 8 if the ERC changes on annual).

Getmoreforless - thank you for doing the calculations! It is looking clearer now.

Our current monthly payments are at £1231 not £1323. We are however are making overpayments of about £100 per month.

Good point about the interest rates rising - I hadn't thought about the interest rates rising or whether I think they might. Definitely something to think about.

getmore4less

Pick a number for your payment and run the numbers

Easy to do with a simple calculator I use
http://www.whatsthecost.com/mortgage.aspx

set term to 2 years interest only and set the payment
(do two one for your current mortgage and one with the ERC/fees added)

then look at the details, fiddle with the rate or stick a rate in if you have a deal in mind. and see which has the least left after 20months.

Mortgages, allthough the maths is not straight forward, are dead simple to compare on the money level.

for the sme amount paid out per month which do I owe the least on at some point in the future(adding the fees makes it simple).

then there is the fuzzy stuff, which way will rates go, will we want to move, how much can we afford/overpay,ERC......