Remortgage adding to my loan due to ERC

herc182

Hi

I have used a mortgage adviser in the past and been discussing the following.

I am fixed until June 2019 on a rate of 3.09%. I was thinking that the latest rates are very favourable, and having used the "is it worth it" tool on MSE and was suggested that I shouldnt move unless I could get less than 1.81% (which I can).

However, because there is an ERC which we would add to the mortgage, we are fundamentally adding to our loan.

What I don't understand (because I am slow i guess) is how adding around 6k to our loan over 20 years is cheaper to use by about £8.5k over the next 3 years if we remortgaged (that figure is based on assumptions and a chat on the phone with our mortgage adviser).

thanks

amnblog

You have 3 years to run on the current rate.


If your ERC is 3% you need a rate 1% lower than 3.09% over the 3 years just to break even.


The tool you have used on this website effectively makes that calculation.


1.81% will be the rate not to lose out.


You will probably need to get a rate of 1.5% or less over 3 years to make any sensible saving.

herc182

So i currently use a broker but thinking of going on my own. They do not have deals with HSBC apparently which also rules out first direct.

However, in the interim i am considering a LIFETIME tracker which is currently (with base rate) = 1.74%. That is with HSBC too.

Thoughts on:

1 - is it that painful to remortgage without a broker
2 - lifetime tracker worth it?

getmore4less

herc182 wrote: »

Hi

I have used a mortgage adviser in the past and been discussing the following.

I am fixed until June 2019 on a rate of 3.09%. I was thinking that the latest rates are very favourable, and having used the "is it worth it" tool on MSE and was suggested that I shouldnt move unless I could get less than 1.81% (which I can).

However, because there is an ERC which we would add to the mortgage, we are fundamentally adding to our loan.

What I don't understand (because I am slow i guess) is how adding around 6k to our loan over 20 years is cheaper to use by about £8.5k over the next 3 years if we remortgaged (that figure is based on assumptions and a chat on the phone with our mortgage adviser).

thanks

The sensible thing is not to borrow the ERC(£6k) over 20 years you use the savings from the lower rate to pay it off in less time than the old rate charges ERC(June 19).

if you just have the lower payment and spend the money the savings won't be as good.

amnblog

Pay a £6,000 fee, but don't get advice on the new rate? Doesn't sound too clever to me.