What remortgage option to be early Mortgage Free

Hello everyone. I hope we all are keeping safe.

I have a small house worth 155,000 with a mortgage of around 65,000  (under 42% LTV). In my household of 2 adults + 2 kids, my employment income is only source of income and hence we want to be mortgage free so that in case something were to happen to income (example redundancy), we could at least be mortgage free.

I am with Nationwide paying 1.94% interest and my long term fix is now coming to an end. They will let me switch 3 months early. If my employment income does not go down, then we can pay off in 4 years with interest rate at 1.60%.

However I am unable to find a suitable option, as only options are 2 years, 3 years or 5 years.

As my mortgage amount is relatively low (under 65000), a difference of 0.10% will be under £70 per year, but if interest rates were to go up in future, then next remortgage might get expensive.

What factors should I consider to decide the length / term / years of remortgage?

Replies

  • edited 28 January at 6:27PM
    SistergoldSistergold Forumite
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    edited 28 January at 6:27PM
    3 year option after which it reverts to variable by this time you can then pay it off? 
    Initial mortgage bal £487.5k, target £380k
    Mortgage start date first week of July 2019,
    Mortgage term 23yrs(end of June 2042🙇🏽‍♀️), 
    Target is to pay it off in 10years(by 2030🥳). 
    MFW start Jan2021 mfw#47 (2020 mfw#136)
    £12K in 2021 #54 (in 2020 #148)
    Recovery Pot £725/15k
    To save £100K in 48months start 01/07/2020 @£73400 SoFar 
    Am a single mom of 4. 
  • caelercaeler Forumite
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    In my experience with nationwide, the mortgage adviser will make you consider all your options! If you think you’ll pay it off sooner don’t pick too long a term or you’ll be like me facing an ERC! I’ve always fixed as I like certainty but you might consider their tracker which will give you total flexibility. 
    Mortgage started on 17 December 2012 at £169,000 with a 25 year term finishing in 2037
    Mortgage Repaid on 20 April 2021
    Click here to visit my Mortgage Free Wannabe Diary
  • If you think you’ll pay it off sooner 
    I can pay it off in 4 years comfortably, if my employment income does not go down AND mortgage interest rates at my LTV (42% currently) stay below 2%

    I was thinking taking 2 year fix followed by another final 2 year fix - not sure if that is a wise move because what if after 2 years, the interest rates are high plus some lenders refuse to offer a mortgage to me due to value below certain amount?

    Will appreciate your thoughts please...
  • caelercaeler Forumite
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    Sensible logic, but less sensible if you don’t think you can secure the rate?!  Only you know your financial position, financial history and LTV. But you rightly point out, outside of a fix you have to expect the worst, rates could go up. Or consider a 5 year deal and take the hit on an ERC. With nationwide its 1% in the last year of a 5 year fix so you might decide that isn’t too awful given you’ve had the security and certainty of a fix. 
    Mortgage started on 17 December 2012 at £169,000 with a 25 year term finishing in 2037
    Mortgage Repaid on 20 April 2021
    Click here to visit my Mortgage Free Wannabe Diary
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