Remortgage Calculation Question

amnblog

All the usual in depth mathematical calculations on this question.

It's much simpler than that.

The redemption fee is 4%

You have three years to run so you need to save 4/3% a year = 1.33% to break even.

Can you get a fixed rate for three years under 3% (current rate less 1.33%), yes you can.

There is therefore a potential saving.

Worth therefore getting your options professionally analysed.

Factors to be considered include.

Does your repayment fee drop to 3% shortly.
Switch to variable runs the risk of rate risks reducing your saving.
If you add the repayment fee, when will you clear it.
What are the fees involved.
Can you get a remortgage anyway.

getmore4less

amnblog wrote: »

All the usual in depth mathematical calculations on this question.

It's much simpler than that.

The redemption fee is 4%

You have three years to run so you need to save 4/3% a year = 1.33% to break even.
.

that works for interest only mortgages, for repayment it will be different and is just a guess.

eg. for a 3 y check
£100k 3% £500pm(around 23years) 3% penalty.

a 2% rate will have you £330 worse off

breakeven is a rate of 1.922% a reduction of 1.078

The guess is 7.8% out

on a shorter term paying £1000pm(<10y) £510 worse off on 2%
break even is 1.813 a reduction of 1.187%

now the guess 18.7% out

amnblog

I stand by what I said.

All you need to do is see if you are in the ball park.

The interest is levied against the outstanding balance no matter whether you are repaying capital or not.

If you are paying off capital very quickly it does make a difference (as capital costing interest comes down) but that is to be considered once you know the idea has some legs.