how much of my mortgage to pay off?? 21 September 2007 at 12:33AM in Mortgage-free wannabe 4 replies 749 views

jr_xyz

:money: hi guys

i recently(2 months ago) took out a 10 yr mortgage and soon will have enough to pay it all off. however, the terms state if i pay it all off within my 1st yr i will have to pay a £1,000 fee. the mortgage was for 30k :money: and i'm wondering what the maximum amount is i should pay off so i can still continue my mortgage but accrue the minimal amount of interest. the mortage is with bristol & west. :money:

thanks

:money:

Moneygoes2money

This could be the shortest mortgage is history! The forum will need to know the terms and conditions of your mortgage regarding early repayment. Look in your mortgage offer document, which will tell you whether an early repayment charge is applicable for early repayment and whether you are allowed to make an overpayment without penalty. Also, the forum will need to know your current interest rate to determine whether you will be better off depositing the capital in a savings account as opposed to paying off the mortgage. Hope this helps.

jr_xyz

lol yes it could very well be.....i actually had set quite a bit aside for renovation work and building a loft but won't be going through with it hence the extra capital..

ok details as requested

mortgage is actually 50k, not 30k (that was a typo)
i can make unlimited overpayments, no charges
early redemption fee is 1% of mortgage (so thats £1,000) if paid within the first year
and the interest rate is 6.79% (boe rate + 1.04%)

Moneygoes2money

My understanding is you cannot clear the mortgage in full otherwise you will incur an early repayment charge of £1,000 but you can make unlimited overpayments without penalty.

Having looked at Bristol & West's website, I note their easyflex Buy to Let allows part repayment - no charge, full repayment - 2% of the original loan amount until 31/08/2008.

You could reduce the mortgage balance to £1 (or whatever minimum balance Bristol & West will allow) and then the final £1 can be paid when the full repayment penalty period has expired.

I strongly recommend you check this with Bristol & West as I wouldn't want to be responsible for you incurring an early repayment charge.

I don't see the point in keeping the capital on deposit because it is going to be nigh on impossible to obtain an interest rate higher than 6.79% after savings tax has been taken into consideration so I would go for part repayment for as much as Bristol & West will allow without penalty.

Hope this helps.

Kaz2904

Find out your minimum payment and * it by 24. That gives you 2 years worth of payments. Then pay off the left over sum. Continue to pay your mortgage at your minimum payment and when you get out of your redemption penalty period you can clear any defecit. I would do it this way to ensure that I did not pay it off before the end of the year so that I would not get charged.