Mortgage Crossroads

SouthLondonUser

What is the question, exactly?
Also, what is the balance of the mortgage?


You need to remember that the instalment for a repayment mortgage is made up of interest + capital; the real cost of a mortgage is not the monthly instalment; the real cost is interest + fees and other expenses. The principal that you repay is not a cost – it is money you are repaying to yourself as it adds to your wealth.

Of course you must be able to afford and be comfortable with whatever instalment amount you commit to; there is no point in saying that a 10-year mortgage will charge less interest than a 20-year one if you cannot afford the higher monthly instalment.

But if you are comparing two mortgages and want to understand which will cost less, then you need to compare interest and fees.

If you have access to a spreadsheet, the CUMIPMT formula will calculate the interest paid on a fixed-rate mortgage. For example
=- =CUMIPMT(2%/12,120,100e3,1,60,0)
will calculate the interest you pay in the first 5 years (months 1 to 60) if you borrow £100,000 for 10 years (120 periods) and the rate is 2% per annum (i.e. 2%/12 per month).
Add fees, legal costs etc, and that’s the cost of that mortgage over a certain timeframe.

If instead the question is whether you should fix for 10 years, well, certainty has a cost. You need to look into what the early repayment fee would be, and be absolutely sure that you would never need to move for 10 years, or you’d be forced to pay those fees. For me, 10 years is too long a period, I’d never commit to that long, but everyone is different. You can often port, but porting is subject to status and criteria at the time of porting, i.e. you can have no guarantee that your porting will be approved. Not to mention it automatically rules out the option of selling, renting, then buying again.

First Direct has a 5-year fix at 1.99%, and Santander has one around 1.90%. Are you absolutely sure a 5-year is too short for you? 10 years is a long time – lots of unpredictable stuff could happen and throw off your plans.

dimbo61

Advice !
We need to know a little more information ?
How much outstanding on the tracker rate ?
How much outstanding on the SVR ?
Term left ? Value of property ?
Age, Income, current lender, What deals they have for existing customers !

dimbo61

The deal you are looking at gives you long term security.
If you overpay a little each month you could be mortgage free by the end of the 10 year fix.
Some people like to change lenders and find a Better deal every 2/3/5 years.
Many others are not interested and simply want to clear that debt ASAP.
Will you want to buy a bigger property in a few years time

1jim

dimbo61 wrote: »

The deal you are looking at gives you long term security.
If you overpay a little each month you could be mortgage free by the end of the 10 year fix.

Im looking at either the First Direct or TSB 10 year fixed and also looking at overpaying which will mean I can pay off mortgage earlier (wouldnt be more than the 10% either lender allows each year)- do you know if the lenders require you to keep mortgage open with a minimal balance until the 10year fix has ended or if they may charge a fee for paying the mortgage off fully before the end of the term?