Crunching Numbers...

MoneySavingMole

Hello!

So, firstly, hats off to everyone on here... You're advice & determination is inspiring!
Which brings me to a little number crunching of my own...

And here's my journey, so far... Skip to the bottom for a bulletpointed list if you wish...

First Time Buyer c.2011 on a property worth £89,950
- it's probably worth noting the property wasn't in the best shape, I've since fitted a new kitchen, bathroom, full central heating system, removed a chimney breast, boarded the loft, had the driveway resurfaced (printed concrete) and an olive tree planted (I know, it won't add value but it's lovely!)

Anyway, FTB - £89.950 minus 10% = £80,955 for 2 years at 5.49% (If I remember rightly... £510+/- pcm) with Halifax.
- no product fee's were added as we paid them off etc.

We refixed with Halifax due to a lack of time, a lack of money (for valuation) and busy renovating the property. To better manage finances, we borrowed £78,132 on a manageable 5 year deal at 4.49% (£450+/- pcm) based on their valuation at the time (£87,601).

Still reading? Excellent!

We are 4 years in as of May 2017 and if we end the agreement early, there's the dreaded Early Repayment Charges...
A) On or before 31/05/2017 - 3% of value or £2343
On or before 31/05/2018 - 2% of value or £1562

Finally, my predicament is thus...

I've been seeing the bizarrely low interest rates lately and wondering if I should bite the bullet and pay the ERC/valuation (Zoopla says worth £120,000) in favour of a better monthly deal
OR
Do I let it roll, start seeking a new deal in the Summer and pay a lower ERC (£1500)/add the ERC to the new mortgage amount?

Another predicament is, we may decide to pull down a conservatory and build a single extension - releasing 20k to fund this at remortgage would be the most sensible way of doing this in my eyes.

Any feedback/ideas/comments are appreciated.

Bullet Points;
Property valued by Halifax (Mortgage Lender) c.2013: £87,600
ZOOPLA valuation, as of today: £119,000
Current Mortgage Deal, as of May 2013: £78,000 over 23 years at 4.49% - £450pcm
Current Mortgage Debt, as of today: £69,500+/- over 19 years
Early Repayment Charges on or before 31/05/2017: 3% of value or £2343
Early Repayment Charges on or before 31/05/2018: 2% of value or £1562

Questions;

1. Do I pay ERC/Valuation Fee's & Product Fee's and reduce monthly repayment?
2. Do I let the current deal roll and avoid any charges?
3. Do I release money for extension at new rate, paying ERC/Valuation/Product Fee's but get £20,000 at £100+/- a month difference on repayment?

Cheers!

MS-Mole

NorthernMonkey1

The answer to this, or any similar complex problem, is to whack it all in a spreadsheet, and work out the answer.

Do it monthly, by working out the monthly interest, take your interest rate 4.49, then divide it by 100 (0.049) then divide it by 12 (0.004033)

This is used to calculate your monthly charges. Multiply this number by the outstanding balance.

With a little effort, you can model the old mortgage, and the new mortgage, and work out the break even point (it will be a number of months ahead)

You can then make an informed decision as to which option is best

MoneySavingMole

THIS is what I love about this Forum!

juststuff123

You might wanna be a bit wary of Zoopla valuations etc. I recently valued my place on the internet just for fun. The valuations varied between £60,000 (I thought I was going to be sick when that figure popped up!) and £147,000 - totally unrealistic in my opinion. If you do decide to re-mortgage or release money for an extension you should probably get a proper valuation to make sure your sums and shiny new spreadsheets still stack up!

MoneySavingMole

Yeah, I'm fully aware Zoopla is not accurate - but I do believe, due to the work I have carried out, I must have increased the value of the property?

I'm basing all mortgage calculators on £100,000/£105,000/£110,000 - a range of safe figures I'd be happy to say the house is worth, if I'm honest.

I've mainly done it to see the differences in interest charges vs. LTV... it fluctuates slightly, but nothing noticeable.

Currently worked out if I continue as I am, I'd pay £33,000 in interest.
If I left and remortgaged, it's more like £15,000... and it'll be paid sooner (3-5 years sooner!)

juststuff123

Sounds like a bit of a no brainer at the mo then. Good luck whatever you decide.

MoneySavingMole

It's a no brainer if I pay the current ERC & new mortgage fee's...

I need to decide if I'll miss c.£3500-4000 for the sake of saving £100 a month or not

Decisions, decisions!

NorthernMonkey1

Those numbers don't seem quite right. You need to model only over the next 3 years, as you'll be remortgaging at that point anyway