Switch Mortgage Early - Worth it in the Long Run?

travelmac

Morning - after some advice if possible. I have a fixed rate mortgage which i have entered into the MSE "Ditch Your Fix" calculator to see what rate i would need to get to make it worth while. My numbers are as follows: 
Main Mortgage has £44930 remaining at a rate of 2.48% fixed until 28 Feb 2021. The early repayment charge on this would be £227.00 
2nd Mortgage has £6247 remaining at a rate of 2.29% fixed until 31 Aug 2021. The early repayment charge as of yesterday would be £58.00
The Ditch your Fix tells me I need to find a rate at 1.37% or lower if it is fee free otherwise -2.56% with a £999 fee which the lowest fixed rates seem to have.
However What I don't see to be able to account for in the Ditch your Fix is if i want to pay down a chunk of the balance whilst changing the Mortgage. I already over pay by the maximum so that is not an option. 
If I take, as an example, an HSBC fee free 5 year fixed, i can get that at a rate of 1.59%. 
I would like to know, if anyone is able to calculate, whether by switching now, paying the ERC and paying off around £11000 to leave £40000 balance would be worth it, expensive or such a small amount to make it inconsequential
Thanks for any guidance

dimbo61

You have not given the term.
Put the numbers in " whatsthecost " to see if it saves you money

Thrugelmir

How much are you budgeting for other costs, i.e. legal fees, valuation fee and mortgage exit fee. 

travelmac

Thrugelmir said:

How much are you budgeting for other costs, i.e. legal fees, valuation fee and mortgage exit fee. 

In the example new fixed rate I have found the legal fees and valuation are included and the only exit fees from the existing is the £227 and £58 ERC quoted above
In relation to the term question from Dimbo61 the existing both existing loans run until May 2034. If i was to take a new 5 year fixed rate i would hope to clear it fully within that 5 year period. Hope that helps. 

dimbo61

Well the whole ERC is less than £300 and the exit fee/s to repay both parts of the mortgage.
Well done on saving £10,000 and if your happy to pay off £40,000 plus interest in five years then you have a target.
Is your job safe ????

getmore4less

I would not trust a MSE calculator

You need to do the numbers with your actual payments, term is not good enough if overpaying

you have not said which lender you are with.

ERC  0.5% 6 months to go  and  0.9% 12 months

Looking at the first part it will depend on the actual payment but it does not change a lot as the payment goes up..
with 13y 9m  the contractual is around £350pm
add the ERC to the balance assume no other fees see what rate leaves you at break even in 6 months
In 6 months you need to recover the 0.5% fee which will be about 1% off the rate
£44930 2.48% £350pm £43,379 
£45157 1.45% £350pm £43,379
For a £500pm payment that changes to 1.44% 
if you plan to overpay at the change then to recover that part of the ERC will need an even lower rate on the rest

You then have to factor in what savings rate you could get on the excess saving.

What rate can your current lender offer you and how close to the ERC free can you change some allow up to 3 months early


For the other bit
we can assume you just pay that off early  with a 13y 9m term say £45pm
in 12months
£6,247 2.29% £45pm  interest for 1 year £139 
ERC £58 unless you can find a great savings rate you won't might as well just pay that bit off.

With a 5 year plan I would be looking at 2year fixes they are lower rate and give you better overpayment options.