Ditch my fix?

R1G

Hi,

I have a mortgage of £94,099 with 31 years 7 months left. 19 months is fixed to 3.99%. With uncertainty ahead I have been weighing up whether to fix again early. My current ERC is £2820. I have put my numbers in the ditch your fix calculator and it says only ditch if you can get 2.03% without fees. The best offer i have had is 1.93% for 5 years also reducing my term to 25 years. This is with my current lender with a fee of £999. The ditch your fix calculator says 1.38% with a £1000 fee.

I understand its uncertain what will happen with rates but i'd like some opinions.

Ditch my fix for a 1.93% for 5 years at possible and take a hit? (appreciate it if someone could tell me the size of the hit, i'm not great at these things).

HODL for 19 months at 3.99%?

Mortgage advisers seem to want me to do it (presumably for profit)

The bank literally speak to me like robots.

Sorry if I've missed any details, let me know and i'll reply.

R

ACG

I have not done the figures, I am working off the ones you have given. On that basis it does not appear to make financial sense to do it.

However, if you are reducing the term at the same time then I wonder if that then means it does make sense? Presumably the ditch your fix calculator does not see how much of an impact reducing the term has?

You could hold fire for a couple of months and make an application in around 4 months, at that point you would get a mortgage offer for 3 months and complete once your early repayment charge drops? (assuming it does).

R1G

No unfortunately it will not show me the impact after also reducing the term and assumes i'm taking it out over the same term.

I have spoken to my current lender for the 1.93% but they have said i have 1 week to sign? Is this when i then have 3 months to decide to complete? That's got me a little confused with what my lender has said.

Thanks for your reply.

getmore4less

The first Calc is can you recover the fee in 19 months

Interest only gives the max saving for a lower rate
repayment the savings are smaller so need a lower rate

£94k @ 3.99% ERC £2820

£2820*(12/19)/£94,000 = 1.895% new rate below 2.095%


doing your mortgage 31y 7m mortgage over 1y 7m with the alternatives adding ERC and a £0 fee and £1k fee

the 5 base mortgages are with amount owing in 19 months

amount rate payment owing interest total cost
£94,099.00 3.99% £437.10 £91,666.77 £5,872.73 £5,872.73
£94,099.00 2.10% £339.62 £90,714.60 £3,068.47 £5,888.47
£94,099.00 2.03% £336.52 £90,677.74 £2,972.70 £5,792.70
£94,099.00 1.38% £306.45 £90,293.32 £2,016.83 £5,836.83
£94,099.00 1.93% £331.79 £90,620.46 £2,825.43 £6,645.43


Add the ERC and fees, make the payment the same.
This gives the same cash flow for all the options.

amount rate payment owing
£94,099.00 3.99% £437.10 £91,666.77
£96,919.00 2.10% £437.10 £91,748.15
£96,919.00 2.03% £437.10 £91,649.41
£97,919.00 1.38% £437.10 £91,689.35
£97,919.00 1.93% £437.10 £92,528.68

That 1.93% with £1k fee puts you around £950 behind in 19 months

Now the comparison you need to make is what will the rate be in 19 months because any loss over the 19 months switching now may be recovered in the following years.

with a 5y fix you use 19m then have 41 month left

One 0.25% rise and say £85k(average over the 41 months)

£85,000 * 0.0025 * 41/12 = £726.

How many rate rises do you think there will be in the next 19 months.

By the way the £437 payment on that 1.93% rate is around a 23 term)

R1G

Thanks for that!!

So looking at these numbers i'm better holding on and hoping they don't rise much.

However knowing it will only cost me £950 for that extra security makes me feel a bit better, who knows what's going to happen.

This is my first time thinking of remortgaging and i'm swaying towards ditching and getting that 1.93% and overpaying while i'm on it.

getmore4less

Once you have the numbers for the know data points you do some forecasting with gueses.

If you are planning to overpay the numbers change a bit.

You could also compare using 2 year fix.

Any soft factors like moving or change in circumstances that might restrict you to you current lender.

Changes in LTV can change the future rate guess.

Rates can also move without base rate changes.

Then there is the longer term changes.

I sometime think in payments looking over 5 years
If rates don't move you loose about 2 payments switching, move once 1/2 a payment twice you are ahead a payment

Reality is even 5years is short term in the life of a mortgage(unless near the end) up a bit down a bit....

I suck with low cost tracker and an offset but got very lucky with loads of free money from CC and switched when tracker rates were very good.

Unicorn_cottage

As getmoreforless said have you considered overpaying (I assume you can) to get yourself in a better position when you come to remortgage?

R1G

I haven't considered overpaying in the deal at the minute.I am looking at overpaying if i go onto the 1.93%, around £200pm.

somethingcorporate

R1G wrote: »

I haven't considered overpaying in the deal at the minute.I am looking at overpaying if i go onto the 1.93%, around £200pm.

why would you wait to overpay? It makes more sense to overpay the (current) higher rate. It makes less sense to OP a lower rate when you can get regular savers offering 5% interest.

Unicorn_cottage

Do you have 19 more months to run on the fixed term? What is your LTV?

R1G

19 months left on the current fix and the LTV is 60.65% house valued £155k.

Somethingscorporate,isn't it best to overpay with a lower rate as it eats into your debt more? If i decide to stick with the current rate i'd look to overpay too.