Small mortgage

Dazpotter

Hi, we have a £20,000 balance on our alliance & Leicester mortgage which is flexible with an interest rate of 6.25 %. We have just under 7 years left to pay. Looking around at remortgaging but not really sure what to do. Ideally would like to pay it off as rates seem to be on the up. Any advice would be grateful. Thanks in advance.

WildHaggis

Your best bet, given the tiny amounts involved, is to go to your existing lender, and cut the best deal you can. They will offer you some sort of reduction, especially if you tell them you are doing your mortgage switching homework. The costs of switching will make mincemeat of any potential savings. Then, overpay each month and get rid of the mortgage earlier.

MarkyMarkD

You won't get a better rate than 6.25% from A&L without paying a fee, and you can't switch products (to anything cheaper) unless you have at least £25,000 outstanding.

I don't believe it would be worth the cost of switching, either, given the size of your mortgage.

For others with a small mortgage I'd suggest the ING Direct mortgage as that has no fees in or out, but I really don't think it's worth it. The ING mortgage is 5.99% at the moment but they can increase that whenever they like up to BBR+0.9% i.e. 6.65% at the moment. And you'd have to pay your A&L MEAF of presumably £295 right away to switch to ING.

Interest savings if ING didn't put their rate up = 0.26% on average £10,000 (rough estimate) for 7 years = £182 = less than the A&L MEAF. In fact the savings will be lower because you intend to overpay and ING will almost definitely increase their rate.

I'm assuming that your mortgage is BBR+0.5% guaranteed for the rest of the term?

As your mortgage is fully flexible you should just overpay as quickly as you can.

esthomizzy

Or you could take a look at some of the other threads on mortgage stoozing. This might be ideally suited to such a small outstanding amount. I haven't tried this myself because I have rather a large mortgage in comparison to my income (newly remortgaged due to a break up) and I think I might be likely to get turned down for additional cards.

MarkyMarkD

Yes, good point esthomizzy - you can probably get credit card debt for less than 6.25% (such as 0% + fees) and use it to overpay the A&L mortgage. As it's fully flexible you can draw down to repay the credit cards if and when it's necessary.

Dazpotter

Thanx for the help guys. Mortgage stoozing, that sounds scary. Both myself & the wife have a good credit score so I suppose we could get £10000 each on cards pretty easily really. Will look into it.