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Advice on payment term and op ?

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Hi guys
At present I have a mortgage with Halifax £34900 on a £100000 house (this valuation was prior to the orangery i had on the back and double story side extension) I have looked online as my fixed rate is up in 3 months and I want to try to fix in asap.
Initially I was thinking of reducing the term from 7 years to 5 years but I'm now considering just keeping it at 7 years and making the maximum op per month is there any pros or cons to this ?
The other thing I wasn't sure on way wether to go 2 year fixed rate or 5 year fixed rate, there is very little difference in the interest rate but I was hoping that op would take me to near finishing it by the 5th year and hopefully I will have enough in savings to pay off any remaining balance.

Sorry for all the questions .. my ex husband used to arrange all the money stuff so I'm a wee bit clueless :o

Lisa x
DFW
January £0/£11,100

NSD
January 1/31
«1

Comments

  • It depends how disciplined you are with yourself. If you go for a 7 year fix but always overpay, you would actually repay in closer to 5 years and save on interest. If you choose a 5 year term you are in effect locking yourself in to these extra repayments, so you might have less ability to cope with unexpected costs, car breakdown, roof repairs etc, but will remove the temptation to spend what you would use for overpayments on other things.
    You could look at lenders offering a 3 year fix if you wanted a compromise between 2 and 5.
  • thanks juni ..

    I was sort of thinking that .. if I did the 5 year fix rate over 7 years and set up a dd to overpay per month then I could always cancel if I really needed to .. hopefully not but you never know. I also have a loan finishing in 3 years so the normal payments for this I was going to save and hopefully that would clear the balance.


    thanks again
    Lisa x
    DFW
    January £0/£11,100

    NSD
    January 1/31
  • dimbo61
    dimbo61 Posts: 13,727 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    With a balance of £34900 it maybe cheaper to stay with Halifax and take a 5year fix. Not sure what the rates are with Halifax but even paying exit fee and other costs to move mortgage may outweigh any savings on interest rates.
    You could set up a direct debit to overpay every month but be aware of the 10% limit most fixed rate deals allow.
    With less than 50%LTV you should get a deal of about 2%
  • thanks dimbo .. I was thinking I would be better sticking and the rate was around 2.19% which I didn't think was to bad. It is 10% op but im assuming that the 10% is per year ? .. might need to check this ?
    Lisa x
    DFW
    January £0/£11,100

    NSD
    January 1/31
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Maximum overpayment is normally 10% of the balance owing at the beginning of the year.

    Becareful though. Easy to trip up and incur penalties. As the lump sum will reduce the amount of interest charged. Following normal monthly repayments made in the same year will pay off more capital as a consequence.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    edited 12 February 2018 at 1:26PM
    Run the numbers and see what the difference in costs are between the options.

    With your LTV you should have access to the best rates available.
    the difference in rates won't make a massive difference to the total cost.

    Halifax you can switch 3 months early with no ERC what's your current rate?

    Halifax has rubbish retention rates for small mortgages though

    Halifax retention options seem to be

    2y 2.29%
    3y 2.44%
    5y 2.59%

    To pay this off over 7 years rate,payment total interest
    £34,900 0.00% £415.48 £0.
    £34,900 2.29% £450.06 £2905
    £34,900 2.44% £452.39 £3100
    £34,900 2.59% £454.72 £3297

    To pay this off over 5 years rate,payment total interest
    £34,900 0.00% £581.67 £0.
    £34,900 2.29% £616.16 £2070
    £34,900 2.44% £618.46 £2208
    £34,900 2.59% £620.77 £2346

    lower rate and overpaying will reduce the cost
    a decent rate seems to b around 1.8% over 5y you have
    £34,900 1.80% £608.67 £1620

    saving around £700 over the Halifax option.

    overpaying say to £650pm saves £100ish over 5y

    £34,900 2.59% £650 £2234
    £34,900 1.80% £650 £1513

    there are other options to reduce the cost like using a 0% purchase CC with no fees and managing cashflow.

    With End of life small mortgage the simple option may be to find a good 5y rate and overpay as much as you can within ERC limits will get much of the savings.

    eg. the Halifax 5y retention over 7 years will cost £3297 that's the max you could save
    pay over over 5 years you are down to £2346

    get a better rate and pay over 5y down to £1620.

    With a bit of effort you could squeeze that lower.
  • Thanks a million guys .. I have just checked and the 5 yr rate is 2.59% (I think I would be better sticking with Halifax as there would be no charges ?) I was thinking of setting up a dd to overpay £200 extra per month as this would be within the ERC. then im guessing next year I will see what my ERC threshold would be but hopefully keep up the £200.
    I have used the snowball calculator with these numbers and it should be paid of by the end of the 5 year term .. just in time for the boys going to uni lol
    at present I have 7 years 3 months left (payment date 1st) and was thinking of applying asap, I have a bank appointment for 2nd march but was thinking of cancelling this and just doing online .. any advice regarding which would be better and when I should be able to swap (not sure if I would have to wait until 1st ?


    Lisa x
    DFW
    January £0/£11,100

    NSD
    January 1/31
  • oh just thought as well .. I have a holiday booked for me and the boys and I have to pay in $ .. I was going to use my clarity credit card as it avoids fees but im not sure if this would im pact on my application ? I have only ever used it when paying to avoid overseas fees and it has always been paid back in full .. but it would be a balance of around £850 .. I will pay it off at the end of the month but not sure if I apply before then it waould cause any problems ?


    Lisa x
    DFW
    January £0/£11,100

    NSD
    January 1/31
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    Retention deals don't normally have checks.
  • I would stick with the Halifax and do the overpayments so long as you stick within the 10% overpayment limit. Don't forget as the mortgage balance decreases so will the 10% so you may find in years 4 and 5 you will have to adjust the overpayment down. Don't worry about using your clarity card. It won't affect your application. Not sure if Halifax will even check as you not moving lenders.
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