Remortgaging by Paying Current Mortgage down to Almost Zero?

Jaith

Couldn't think of a concise title here...

We have a 5 year fix mortgage with First Direct we're a few years into. We would save substantially on monthly payments by moving to another deal, but when the ERC of 2% for a few more years is taken into account, it's pretty much break-even.

Unlike most banks though, First Direct allow us to pay down the mortgage to virtually nothing, then set monthly payments extremely low - with no penalty at all. For example we could pay it down to £36 then pay £1 per monthly for the next 35 months. Provided we don't pay it off entirely we will see no ERC or other fees at all.

So my question is whether it's possible to take advantage of this by either:

a) Taking out a new mortgage for as much as we can at a lower rate, then paying off this amount from the First Direct mortgage
b) Remortgaging 99% of the balance with a new bank

Crucially, this would mean keeping two mortgages active at once. I expect that First Direct know this unlikely or impossible, and that's why they offered these terms in the first place, but I want to be sure I'm not missing a trick here. Are there any lenders that would allow us to do this?

kingstreet

No. You can have only one first charge over a property and FD has that. If you replace that, you'll trigger the ERC.

Jaith

That figures, thanks

getmore4less

if the ERC and new deal will be break even over the rest of the fix then the other option is to find other ways to borrow the money.

might be worth checking your numbers are right for the break even
Months left on the fix ERC and current payment?


For other cheap money, 0% purchase credit cards can be a good source of cheap over payments as long as you can manage the cash flow to pay off before the 0% ends.

if you did pay it down and then move what would the ERC be based on?

clairebeth

That's interesting about using 0% cards to save interest on the mortgage. Is this something that people do often?

getmore4less

clairebeth wrote: »

That's interesting about using 0% cards to save interest on the mortgage. Is this something that people do often?

Its called Stoozing not so profitable these days but in the good old days when the CC were giving money away SBT with NO fees

People had multiple £10k's offsetting or earning interest.

would have to check my max but was over £40k and probably went over £50k at some points.

clairebeth

Wow! Thanks for the insight!

dimbo61

Why not overpay the mortgage every month