Paying lump sum & ETC?

Razdav

Hi,

Wonder if anyone can help with my question, please.

I have 10 years left on my mortgage currently at £72000 but have ETC until 2020 of £3,500.
I have a £30,000 lump sum I would like to pay off the mortgage as we are looking to pay off as quickly as possible but I'm not sure whether I should pay now or wait and see if I would be able to pay the full mortgage off before 2020 first.

Do you think its worth paying the ETC's now or should I wait?

Thanks

AnotherJoe

Is ETC Early Repayment Charge (eg usually ERC)? Maybe Early Termination Charge?Same thing.

If you paid off £30k you'd save 2 years interest at say 2% (you don't say your mortgage rate which is vital in these calculations), that comes to £1,200 which is more than £3,500.

And you could probably get close to 2% interest on the £30k anyway. Thus gaining you about £1,200.

So no, don't pay it off.

Razdav

Hi,

Sorry my rate is currently 3.59% until 2020.

ACG

Most lenders will allow you to overpay on the mortgage without any ERC, typically 10%.

So that would mean you can overpay by £7,200 (but double check).

The remainder could be put in some sort of savings account for a year, then overpay again next year and then the year after pay the rest off?

AnotherJoe

Razdav wrote: »

Hi,

Sorry my rate is currently 3.59% until 2020.

OK so basically you can save at 2% and are paying 3.6% so over 2 years you'd lose about £1,000 on interest which is better than losing £3.5k on ERC.

So do what ACG suggests, max out allowed repayment, then put the rest in the best 2 year savings scheme. You could also look at your pension position and use some of it for that.

getmore4less

£3,500 on a £30k overpayment is unlikely(>10%)
Even on £72k thats 4.9%

need proper numbers and dates
2020 could be be 21 months up to 33 months

ERC. is usually a % of the payment and often goes down each year on longer fixes so could have a dates where it changes.

There will be an ERC free payment allowed what's that?

what savings rate can you get?
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