Early repayment redemption fee - any avoidance/reduction tricks out there?

grocerjack

annabanana82 wrote: »

One of your previous posts, it seems you entered a 5 year year deal back in 2016 (your ERC seems quite high as you are close to the end?).
Pay 10% this year and next then redeem at the end of your term in 18 months or so.

Thanks very much, this is sound advice, so we might try this. Much appreciated

grocerjack

getmore4less wrote: »

The saving is only the interest, the first (£200,000/£1,600) 125(10 years 5 months) payments are just resorting your capital

What is your rate and term?

With a 5% ERC you may be on a longish fix so £200k with £1,600pm here are your current interest savings for full term(which is not what you would pay)

rate...term...interest
1.5%..137m £17,607
2.0%..141m £24,457
2.5%..145m £31,923

but your ERC will go down well before those terms.

key information needed

Rate,amount, full term, payment, ERC % and any date where it changes to a lower amount, and date down to Zero(end of fixed term)

If we go with 2% and 11y 9m full term
break even on the ERC will be close to 3 years with ERC free over payments.

How much is left on your fixed term?

The rate we pay is 1.9%, ending in 2021, when I will look at the deals then if we haven't redeemed. The mortgage term ends in 12 years. We've been here 20 years, but like many we pushed every bit of our budget to the very limit when buying the house - it was pretty much all we wanted to live in until we croak.

It just seems so tempting to own the house outright and whilst I'm still working be close to £1600pm better off, money which will be used for savings in the main (when it isn't being used as Bank of Mum and Dad!)

This is great information, thanks for taking the time to help, much appreciated.

getmore4less

new information.

12 years
1.9%
ERC free 2021

along with
Mortgage £200k
payment £1,600
ERC £10k

When in 2021 does the fix end that will make a difference.
min 12 months(jan 20221), max 24 months(Dec 2021)

with a 12year term it look like this for 1 year and 2 years
Y.amount........rate....payment...left..........interest
1.£200,000.00 1.90% £1,554.33 £185,018.04 £3,669.98
2.£200,000.00 1.90% £1,554.33 £169,748.93 £7,052.81

The max you can save is £7k, why pay £10k to do that?

if paying closer to £1,600pm the interest saved will be a little less.

Using the max ERC free overpayment that will reduce the interest more.

grocerjack

Thank you very much, food for thought

getmore4less wrote: »

new information.

12 years
1.9%
ERC free 2021

along with
Mortgage £200k
payment £1,600
ERC £10k

When in 2021 does the fix end that will make a difference.
min 12 months(jan 20221), max 24 months(Dec 2021)

with a 12year term it look like this for 1 year and 2 years
Y.amount........rate....payment...left..........interest
1.£200,000.00 1.90% £1,554.33 £185,018.04 £3,669.98
2.£200,000.00 1.90% £1,554.33 £169,748.93 £7,052.81

The max you can save is £7k, why pay £10k to do that?

if paying closer to £1,600pm the interest saved will be a little less.

Using the max ERC free overpayment that will reduce the interest more.

Mortgage_Adviser

Stick the money that you can't overpay in to savings account. According to this site the best deal currently is 1.66%
Also drip feed it monthly in to regular savers which currently pay up to 2.75% or if have children, children savings pay up to 3%(£5,000) per child with nationwide or 4.75% Regular saver (Halifax).
This will allow you to offset most (If not all) interest on your main mortgage after the 10% overpayment limit been used up.
Also check when you new mortagge year starts as 10% resets every mortagge year and you can not use it retrospectively for the years you did not overpay.