Should we ditch the fix?

MrsWow

Hello,

I was hoping somebody might be able to advise us if it worth me ditching our fix mortgage? Checking with MSE Ditch the fix calculator we should remortgage if we can find anything below 2.2%.

Currently we have a fixed mortgage for 5 years with Tesco Bank at 3.69% with 2 years 6 months remaining. We need to borrow £238000 and the house value is around £400 000. The monthly repayments are £1069.00.

Our current ERC fee is £7100.

The best 2y fix rate is 0.99% from HSBC and the just in fees are £2k but the monthly mortgage will be £765.
The best 3y fix rate is 1.44% from TSB, fees around 1.4k and the monthly mortgage of £815
The best 5y fix rate is 1.83% from Virgin, fees around 1.5k and a monthly mortgage of £860

Is it worth us remortgaging to get a lower rate or just we should just carry on with what we have?

Any advice would be highly appreciated.

Thank you

ThePants999

Stay: 30mths @ 1069 = £32,070

Switch to 2yr fix - pretend for a moment you could get 30mths on that rate. 30 mths @ 765 is £22,950. Add fees and total cost is £32,050. Not enough saving to make it worth switching, especially since you'll have more fees to pay at 24mths instead of 30mths.

Switch to 3yr fix, just looking over 30mths for ease of comparison: 30mths @ 815 = £24,450, plus fees = £32,950. So you don't switch to that.

Switch to 5yr fix. In first 2.5yrs, you pay 30*860 plus fees = £34,400. Question becomes one of whether you consider it worthwhile paying £2,330 extra over 2.5 years to have a 1.83% rate locked in now for the 2.5 years after that. I imagine most people would say no.

TheShape

HSBC will save you £7296 but cost you £9100 over 2y.
TSB will save you £9144 with a cost of £8500 over 3y.
Virgin will save you £12540 with a cost of £8600 over 5y.

All the above figures are for the term of the new mortgage and assuming the Tesco rate was the same for that period. I think the calculator may be comparing the cost of the new mortgage vs 3.69% for the whole term but you might get a better deal than that when you remortgage.

HSBC is out of contention as far as I can see.

For the other two though:

I you could get a rate in 2yrs 6 mths that gave you a monthly payment of approx £1016 per month you wouldn't have saved anything over 3 years by going with TSB.

If in 2yrs 6 mths you can get a rate that brings your payments down to approx £938 per month you wouldn't have saved anything over 5 years by going with Virgin.

All the above assume you'd pay the same fees for a new mortgage and MASSIVELY assume I've done the sums right.

From what I can see, you'd be betting on not being able to get a mortgage with payments of less than £938 which I think will be around the 2.1% mark when you remortgage in 2yrs 6 mths.

Maybe check my sums and go back to the calculator.

getmore4less

Add the fees make the payment the same and see what's left using just the difference in payments gets the wrong answers because the capital paid off is different.

MrsWow

Now that's very useful information. By looking at the numbers it doesn't make sense to remortgage and foot the £7.100 ERC fees as it's more expensive.

My next question is, what if we do remortgage and overpay the difference to match our existing mortgage? So if we take, let's say the 3y mortgage and pay £815 per month and overpay £254. Will that be better? As we will pay £1069 per month anyhow for the next 2.5 years.

PS: what a fantastic forum. Thank you for all the advice and also for taking the time to reply to my thread. Didn't expect people to take the time to reply so fast!

dimbo61

Have you got £7100 spare or need to borrow it ?
take into account ALL the remortgage costs and you will make little if any difference.
If you can overpay the current mortgage every month.
Check with your lender but most allow 10% at least

MrsWow

Yes we have the money for the ERC and also for the extra taxes that we need to play.

We are overpaying a bit each month but as the mortgage is £1069 we can't overpay a lot.

We would like to still pay the same amount each month even if the mortgage is less but overpay more...

Thrugelmir

MrsWow wrote: »

Yes we have the money for the ERC and also for the extra taxes that we need to play.

We are overpaying a bit each month but as the mortgage is £1069 we can't overpay a lot.

If you've the cash to fund the remortgage. Why can't you use that to overpay the mortgage?

getmore4less

MrsWow wrote: »

Hello,

I was hoping somebody might be able to advise us if it worth me ditching our fix mortgage? Checking with MSE Ditch the fix calculator
we should remortgage if we can find anything below 2.2%.

Currently we have a fixed mortgage for 5 years with Tesco Bank at 3.69% with 2 years 6 months remaining. We need to borrow £238000 and the house value is around £400 000. The monthly repayments are £1069.00.

Our current ERC fee is £7100.

The best 2y fix rate is 0.99% from HSBC and the just in fees are £2k but the monthly mortgage will be £765.
The best 3y fix rate is 1.44% from TSB, fees around 1.4k and the monthly mortgage of £815
The best 5y fix rate is 1.83% from Virgin, fees around 1.5k and a monthly mortgage of £860

Is it worth us remortgaging to get a lower rate or just we should just carry on with what we have?

Any advice would be highly appreciated.

Thank you

2 key dates 2 years and ERC free 30 months

£238,000 @ 3.69% £1069pm
£229,615 2y
£227,421 30m

£247100 @ 0.99% £1069pm

£226,138 2y
£220,833 30m


over £3k better off after 2 years if you switch even with £9.1k of fees

do similar calculations for the other options.

(the others have failed to take account of the amount owing which is critical to the numbers)

getmore4less

Also after 2 years on the 0.99% you will owe less than 30 months on your current deal.

Glover1862

With most lenders you'll need to find the £7.1k upfront, product fee you can add to the mortgage.