Is this remortgage plan sensible?

Lee777

I'm currently 2yrs 8months into my first time buyer mortgage:

LTV: 90%
Term: 30 yrs
HSBC 5 year fix on 4.49% until 31/03/2019
borrowed: £121,500
remaining: £116,000
payments: £615
current ERC: £2,500

The HSBC remortgage tool indicates re-mortgaging the £116,000 would give an LTV of 75% (they assume value of house has risen in the calculator).

So I'm currently trying to decide what deal to move onto, and if it's worth doing bearing in mind I will have to pay the £2,500 ERC using a 0% money transfer credit card...

I will probably go for one of these:

5 year fix, 1.99%, payment £460, £749 fee
5 year fix, 2.14%, payment £467, no fee
10 year fix, 2.69%, payment £500, no fee

I've worked out I can use the monthly saving to pay off the ERC on credit card within 16-21 months depending on which of the above deals I go for. After that, I plan to divert the monthly saving to overpayments.

This all makes sense in my head, but what say MSE folk? Good idea/bad idea?

ViolaLass

Might you want to move in the next 5 years?

Have you allowed for the fee in the first option?

Lee777

We plan to move in about 5 years, although the mortgage is portable. The £750 can be added to the mortgage.

getmore4less

working on 28 payments till ERC free and 5 years
£116,000 @ 4.49% £615pm owe £110,669
[STRIKE]£118,500 @ 2.19% £615pm owe £107,056, £93,241[/STRIKE]
£118,500 @ 2.14% £615pm owe £106,921, £92.960
£119,249 @ 1.99% £615pm owe £107,301, £92,950

if going for 5 years the fee option is better, both cover the ERC before it would be zero.

if the fees on the balance transfer will be higher than the mortgage rate the numbers will be different but with 3k to play with it would need to be very high to be worse off.


edit: use the right rate on the no fee option 2.14% not 2.19%

The result is a lot closer.

no overpayments and pay ERC up front after 5years

£116,000 @ 2.14% £467pm owe £99,542
£116,749 @ 1.99% £467pm owe £99,517

Fee and lower rate is still better.

ViolaLass

Lee777 wrote: »

We plan to move in about 5 years, although the mortgage is portable. The £750 can be added to the mortgage.

Not my point - you need to allow for it in the costs i.e. over 5 years, it makes that option more expensive than the no-fee option (7 x 60 = 420)

Lee777

getmore4less wrote: »

working on 28 payments till ERC free and 5 years
£116,000 @ 4.49% £615pm owe £110,669
£118,500 @ 2.19% £615pm owe £107,056, £93,241
£119,249 @ 1.99% £615pm owe £107,301, £92,950

if going for 5 years the fee option is better, both cover the ERC before it would be zero.

if the fees on the balance transfer will be higher than the mortgage rate the numbers will be different but with 3k to play with it would need to be very high to be worse off.

That's great, thanks. The fee is 1.69% on the money transfer. moneysavingexpertdotcom/loans/plastic-loans#interestfree
Seems like I should be better off in the long run.

I was considering the 10 year deal as it's portable and should let me move in 5 years, although the interest rate jumps a fair bit (2.69%)

getmore4less

got the rate wrong in previous post have fixed it and added the pay the ERC up front versions and no overpayments.

Fee option still better.

personally I think relying on porting to move is adding significant uncertainty for someone that sees themselves moving within the fix period.
Check the lenders additional borrowing rates against others.

getmore4less

ViolaLass wrote: »

Not my point - you need to allow for it in the costs i.e. over 5 years, it makes that option more expensive than the no-fee option (7 x 60 = 420)

Lower rates pay off more capital per month so you have to account for that in the comparison.

£116k @ 2.14% £467pm £99,542
£116k @ 1.99% £460pm £99,132

£420 lower payment and owe £410 less after 5 years for a £749 fee