Paying off early

davidscot

Anyone help us along the way here.
We are currently coming to the end of our fixed rate mortgage deal.
Only have £25k left to pay and our LTV going by the help page on here is working out at 15%.
We might be in a position to pay off early in a couple of years so I was wondering if anyone knew of a good deal where the monthly payments are low and no early repayment fee's are charged.
Had a look around here on the help pages but as always it pays to ask fellow MSE members for advice. Cheers

pjcox2005

If you don't anticipate paying it off for a couple of years, then I would just go for the lowest variable or fixed rate you can find on typical mortgage calculators.


Given the low loan amount you want to ensure you're paying one with no fees otherwise this will disproprotionaly impact the overall cost so a low percentage rate may be no good.


I don't think you need to be concerned with the no repayment charges as these tend to fall away at the end of the fixed period anyway. So 2 yr mortgage will fall away at the time you want to repay the mortgage.


The only other point to add is make sure that paying it off in full is the best option. It may be for peace of mind which is fine, but econcomically you may find having it in higher interest savings accounts, investments or pensions will be better than the saving on the mortgage interest.


Great position to be in though.

davidscot

Yes I know we are fortunate to be in the position we are in. I appreciate what you also say about putting the extra funds into savings, pensions etc.
So you think the best bet is going for the lowest fixed rate even over 3 years with no set up fee's would be best?

pjcox2005

davidscot wrote: »

Yes I know we are fortunate to be in the position we are in. I appreciate what you also say about putting the extra funds into savings, pensions etc.
So you think the best bet is going for the lowest fixed rate even over 3 years with no set up fee's would be best?

I'm not a mortgage broker, but yes, although if you are intending to pay it off after two years then I'd probably go with that (i.e. 2 years) as it is the more standard period banks and building societies offer on their mortgage deals I believe.


The no set up fees are crucial though on getting the best rate as a 1% increase on a £15,000 mortgage is only £150 per year (under £300 for two years as you've paid more capital off) so a set up fee of £950 which can be common would effectively mean a higher interest by 3% plus (Note that's a very rough calculation to demonstrate point only).

AnotherJoe

There are plenty of mortgages on 2 and 3 year fixes, so why not go for one of those? The interest rates will be lower as well. As said, make sure you calculate all fees in.


p.s. also consider your pension position. If you are high rate taxpayer(s) IMO it would be crazy to throw away 40% tax relief to save say 2% on very low mortgage payments anyway.

Zero_Sum

Other thing to consider, your current provider may offer a retention payment.
For example Nationwide give you £100 to stay with them which if you take a 2 year deal on your loan you're effectively knocking 0.2% off the rate which is better than moving loan to someone offering 0.1% less

davidscot

AnotherJoe wrote: »

There are plenty of mortgages on 2 and 3 year fixes, so why not go for one of those? The interest rates will be lower as well. As said, make sure you calculate all fees in.


p.s. also consider your pension position. If you are high rate taxpayer(s) IMO it would be crazy to throw away 40% tax relief to save say 2% on very low mortgage payments anyway.

Yes I think that is best. Currently with Nationwide and have just checked website and they are offering 2 and 3 year fixes so will pop into branch this week.

We are not high rate taxpayers and pension arrangements wouldn't be touched but I understand what you are saying

btcp

I just remortgaged with a tracker rate, there is no early repayment charge at all. I am also trying to repay my mortgage early. I know I may be in a minority with this approach and it could be more beneficial to invest, but it is m6 personal preference to get rid of the debt while I can.

Zero_Sum

davidscot wrote: »

Yes I think that is best. Currently with Nationwide and have just checked website and they are offering 2 and 3 year fixes so will pop into branch this week.

We are not high rate taxpayers and pension arrangements wouldn't be touched but I understand what you are saying

As above id just remortgage with them on a 2 year deal & claim the £100

AnotherJoe

btcp wrote: »

I just remortgaged with a tracker rate, there is no early repayment charge at all. I am also trying to repay my mortgage early. I know I may be in a minority with this approach and it could be more beneficial to invest, but it is m6 personal preference to get rid of the debt while I can.

I'd say you are in the majority, after all there's a whole forum here dedicated to people assiduously paying their mortgages off, many at great damage to their pensions.

davidscot

Zero_Sum wrote: »

As above id just remortgage with them on a 2 year deal & claim the £100

Agreed. Seems like the best course of action for now and we get the £100