Pay off mortgage or overpay and avoid exit fees?

kingstreet

Farel01 wrote: »

Will the lender consider that? I thought savings were basically not taken into account when doing affordability and that payment would be our complete combined income each month

The reason I said "normal affordability" is the lender won't reduce the term on the basis of the lump sum, only on your demonstrable ability to meet the increased payments from normal income/expenditure.

cloud_dog

Errrm, I would think the 10% overpayment would be 10% per annum (not each month), although if it is in the T&Cs then all the better.

Farel01

cloud_dog wrote: »

Errrm, I would think the 10% overpayment would be 10% per annum (not each month), although if it is in the T&Cs then all the better.

Yes it is annual, but it is per calendar year and as it's now December, in theory I could pay off 10% now and then another in January.

Farel01

JimmyTheWig wrote: »

They will consider it, but as you say it as far as I am aware it will need to pass affordability without your savings.


The interest charged will depend on your balance throughout the month. Paying it off over a shorter period will mean reducing the balance quicker and so paying less interest.
I make it that if they will let you reduce the term below 4 years then it is worth doing that. If they won't then it's worth paying it off.

I figured yes :-) When you say 4 years, how is that calculated?

getmore4less

Farel01 wrote: »

I figured yes :-) When you say 4 years, how is that calculated?

You make the monthly payments high enough to make the interest of the remaining ERC period less than £6k
Don't forget the lump sums ERC free.

Then use that payment to see what full term would be.

dimbo61

" I have a bit of a dilemma, hope you'd be able to give me some advice. I am 3 years and 8 months into my 5 year fixed rate mortgage at 4.99%. 133000 is left on it. I am due a windfall that will allow me to pay off my mortgage. Dilemma is this; there is a 6K exit fee. "
So you have 1 year and 4 months left of the fix!
Will you really pay £6,000 in Interest in the next 16 months ? ( Having checked on " Whatsthecost" you will pay about £449 a month if you can overpay £13,300 and £12,000 in jan 2017 )
I would still overpay 10% NOW and another 10% on the 3rd of Jan 2017
Then speak to your lender about reducing the term to 16 months !
If they say NO to a 16 months ask how many years can you reduce the term too and save the " Windfall " into the best savings accounts

Farel01

I have now paid off the first 10%, second will be on 3/1, then I have to wait until the 11th which is usually when my credit report gets updated and it's also the 5-7 working days I have to wait until payment is applied to mortgage. I then have an appointment with a mortgage guy from my bank. Have given them all the information on affordability already, just need to add proof that I have paid off all my debt and payslips. They'll set the mortgage to £2000 each month and that all will dip the interest I pay under the 6.5K exit fee. I have plonked the rest of the money to pay it off in a 1 year fixed rate at 1.5% so all in all will be better off than paying it off right now.

Thanks for all the advice people :-)