Remortgaging 2.5 years into a five year deal. Possible? Worth it?

chssvl

I suspect the answer to my question is going to be "no" but I thought I'd go ahead and ask anyway.

About two and a half years ago we bought our first property with a five-year fixed rate, 25-year mortgage from Nationwide at 2.19% interest and an LTV of 15%. Given that interest rates have continued to go down, I checked what I could get if I were to get a mortgage today assuming that:

- Value of the property is unchanged -  I think it's a reasonable assumption as we bought from a "motivated seller" so already got ca. 12% discount vs. the original selling price and we've made some improvements, so that probably evens out the consequences of the current crisis. For reference, a flat sold by the same seller around the same time as ours is currently on the market for ca. 20% above the original selling price.

- We have some savings and could make a down payment to take the LTV to 30% (current balance is just over 20% LTV)

-We'd be happy to slightly decrease the term of the mortgage to 20 years

For a 20-year, five-year fixed rate at 30% LTV Nationwide is offering an interest rate of 1.49% and monthly payments would actually be ca. 10% lower than what we're paying at present. 

I suspect changing banks would not be worth it as we'd have to pay the prepayment penalty (3% until April next year, then 2% and 1% a year after that) in addition to the set-up fees, which would kill any interest rate savings. However, is there any chance that Nationwide might engage in the remortgaging in these terms, maybe just charging the set-up fees?

Thrugelmir

Rather than suffer a 3% ERC. Make overpayments to the mortgage within permissable limits. That's if the amount you are earning on your savings is less than the mortgage rate. 

[Deleted User]

Have you got all your numbers backwards as its very confusing to me.   A LTV of 15% would imply a 85% deposit.   

penners324

Nationwide would still charge the 3% ERC and the mortgage fee.
Wouldn't be worth it. You picked to fix for too long to begin with.

chssvl

Yes, sorry! It's the other way around. Initial LTV was 85%, currently at just under 80% and can do downpayment to 70%. Was thinking about the deposit...

And ys, have thought about making overpayments (especially since savings interest rates are nothing at present), but was thinking more about getting a lower rate and also securing it, especially given the lingering risk of increased inflation and increase in interest rates by the time the current five-year temr expires

foxy-stoat

I doubt interest will move with any significance in 2.5 years, the country will take longer than that to get back to "normal".
Just save the money or make overpayments to your mortgage and fix it again when the time comes.

getmore4less

Pay 3% + fees  now to save 0.71% on a 12.5% smaller amount.(maybe less if you have some ERC free overpayment room)

 You cannot recover the costs over 2.5 years

chssvl

Thanks. I guess that's confirmation. My hope was that Nationwide could be receptive to changing the mortgage and, therefore, avoid the ERC. Thanks everyone!

dimbo61

Anything but.
They may even refuse to give you a new mortgage at the rates you see advertised.