Mortgage Redemption Question

fleetingmind

I phoned up Nationwide yesterday and asked for current balance of my repayment mortgage and also the redemption amount. I think the redemption amount is about 6k more than the current balance.

I'm on a fixed rate for 4/5 years started in 2014. My two questions are:-
When the fixed rate expires would the redemption amount be the same as the balance?

If I had the amount now would I be best paying it off and paying the redemption figure or wait and continue to pay monthly amounts?

Thanks.

AnotherJoe

fleetingmind wrote: »

I phoned up Nationwide yesterday and asked for current balance of my repayment mortgage and also the redemption amount. I think the redemption amount is about 6k more than the current balance.

I'm on a fixed rate for 4/5 years started in 2014. My two questions are:-
When the fixed rate expires would the redemption amount be the same as the balance?

If I had the amount now would I be best paying it off and paying the redemption figure or wait and continue to pay monthly amounts?

Thanks.

Q1 Yes. The 6k extra will be early redemption fee, which is the cost of you getting out of a fixed term rate you signed up for.

Q2 Impossible to say without knowing the exact amount, time left, mortage rate, current payments.

fleetingmind

So currently the mortgage balance is apparently £154,061.08 and the redemption amount is £159,527.60.

Was taken out in October 2014 for £159,999 (So £159,000 plus £999 fee). Repayment over 25 years. Fixed rate of 2.99% for 5 years.

£1,158.75 initial payment then 59 payments of £757.90.

I might be receiving £159k so just wondering if worth just paying the redemption amount or waiting until fixed rate has run out.

Thanks.

Bravestar

fleetingmind wrote: »

So currently the mortgage balance is apparently £154,061.08 and the redemption amount is £159,527.60.

Was taken out in October 2014 for £159,999 (So £159,000 plus £999 fee). Repayment over 25 years. Fixed rate of 2.99% for 5 years.

£1,158.75 initial payment then 59 payments of £757.90.

I might be receiving £159k so just wondering if worth just paying the redemption amount or waiting until fixed rate has run out.

Thanks.

That would be simple sums.

Extra cost of redeeming mortgage early compared to what you could earn if you invested the capital somewhere less the interest owed to the mortgage lender.

AnotherJoe

From July 2016 to Sep 2019 is about 40 months.

ignoring capital repayments, interest will be about 1/12 * 3% * 40 * £160,000 which i make £16,000 (in reality it will be a bit less than this).

So, if you paid off the mortgage early you'd save £16,000 - £6,000 - £10k. (again in reality a little less but not much)
No doubt someone will be along to check my maths shortly, but that looks like a no-brainer to me.


Another way of looking at it, £160,000 each year at 3% you pay £4,800 interest.
The ERC works out at about about 1 years and a bit.
You will be repaying more than 3 years early thus saving more than 2 years of interest.

p.s just seen the post from Bravestar. Good point I've ignored the interest you could earn on £159K. But in reality you'll be pushing it to get anywhere near the 3% interest rate. If it was £10k needed paying back, different sums but very difficult to get a lot of interest on such a large sum.

One other thing to think about,whats your pension like? Could that do with a top up?

yessuz

the most important, IMHO, paying early absolutely everything, you are getting rid of the biggest headache ever.

6k there or there is NOTHING compared with that

fleetingmind

So really I need to work out if the interest i'll pay on the mortgage until the end of 2019 is more or less than than the interest i'd get on interest if i put the £159,000 into a savings account.

With the rate for savings account not better than the mortgage rate i'd be better paying off the mortgage and taking the £6k hit?

fleetingmind

Thank you for everyone's help with this subject. I really do appreciate it.

Apparently you don't pay redemption fees if paying off mortgage due to critical illness insurance pay out.

Phil_H_MLIA(dip)_Cert_PFS

Not forgetting the truly life-changing fact that you can likely repay 10% of your capital balance without triggering the erc.
Whether to repay is a far bigger question - you should speak to a qualified investment adviser and properly establish your "risk:reward profile"

fleetingmind

Phil_H_MLIA(dip)_Cert_PFS wrote: »

Not forgetting the truly life-changing fact that you can likely repay 10% of your capital balance without triggering the erc.
Whether to repay is a far bigger question - you should speak to a qualified investment adviser and properly establish your "risk:reward profile"

Cheers. I've briefly looked into investing it but think it's best just to pay the mortgage off. Now i know i just pay the mortgage amount and no other fees or early repayment/redemption charges it's a no brainer for piece of mind.

Reevrad

HI,

I have called my current lender (The West Brom) as I would like to remortgage in June when my fixed rate deal expires, so I can get a new deal/better deal.
I asked them how much it would cost to clear my mortgage on the 1st June (as per the advice given in the MSE remortgaging guide 2017). My lender just said they could not provide this figure until May 2017 which is no use to me by then as I will want to have secured my new deal by then?
I know I can use online mortage balance calculators to get a good idea of my remaining balance will be but surely they must be a way of getting a firm estimate of what this will be by my lender so that i can use this whilst sourcing new mortgages?
Any suggestions would be welcome.