10 year mortgage mistake!

Nobli

Hello Everyone, I'm feeling a bit better this morning. I know there are worse things to worry about!
Here is some info if you can educate me a bit more about overpayment?
Lender: Coventry 
Amount borrowed: 190000 + 999 fee
LTV 60%
Interest rate 2.2%
Full term: 18years
Payment £1070
ERC terms(% on excess overpayments and when that changes)  10% allowed on overpayments I think.

MFWannabe

Nobli said:

Hello Everyone, I'm feeling a bit better this morning. I know there are worse things to worry about!
Here is some info if you can educate me a bit more about overpayment?
Lender: Coventry 
Amount borrowed: 190000 + 999 fee
LTV 60%
Interest rate 2.2%
Full term: 18years
Payment £1070
ERC terms(% on excess overpayments and when that changes)  10% allowed on overpayments I think.

Firstly that is a really good interest rate for a 10 year term so you did not make a mistake 
Have a play around with the following ref overpayments: https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

Play around with different amounts, overpayments only have to be small to make a big difference x 

tim_london

2.2% is great deal for 10 years considering this was Jan last year.  If you were to remortgage today I think the interest is still hovering at 2%?

Quick calculator check:
If you went for a 5 year mortgage today, where rates are around 1.3-1.4% you will pay approx £70 less per month.  That is not the whole story obviously, because it's not about the amount you pay per month but the amount that is your equity vs going to the bank as interest.  

If I were to pretend in an alternative world, you went for 1.4% 5 year mortgage today and you'd got lucky for get 1.4% again in 5 years time (so 1.4% over 10 years).  The total amount of interest the bank will eat over 10 years is £20k at 1.4% versus £32k for your 2.2%.  So straight away the scaremonger article you've read is off the mark for you, at worse case you are losing out £12k over 10 years (exactly £100 more a month).

Then you should think of this way £100 a month more as a insurance against:

• In 5 years the interest rate can be anything.  If it goes to 5%-10% you'll be laughing your !!!!!! off.
• Remortgaging is stressful, you've now avoiding at least a round of that. 
• Remortgaging will cost money of some kind - valuation and solicitor - whilst some bank offer 'free' cover you know fully there's no such thing as free lunch
  
• If your circumstance change between now and 10 years time (job change, illness, going self employed, bad credit, identity fraud etc), you will not have a situation where your interest rate and monthly payment suddenly spikes up to SVR rate and you not being able to remortgage.

I personally think you done something sensible.  

loveka

That is a brilliant rate! I would have taken that in an instant.

getmore4less

Nobli said:

Hello Everyone, I'm feeling a bit better this morning. I know there are worse things to worry about!
Here is some info if you can educate me a bit more about overpayment?
Lender: Coventry 
Amount borrowed: 190000 + 999 fee
LTV 60%
Interest rate 2.2%
Full term: 18years
Payment £1070
ERC terms(% on excess overpayments and when that changes)  10% allowed on overpayments I think.

if that is a Coventry 5+5 deal where the ERC drops to 0% after 5 years that is not bad at all and may be a good choice with an early get out.


The absolute best rates around once you factor in fees are over 1.35% so lets go with that as the best of the best with no rate changes as a comparison(very big mortgages it does get a bit lower)


lets runs some numbers first the 10years with the same payment

amount	rate	payment	owing	interest
£190,999.00	2.20%	£1,071.66	£94,255.74	£31,856.20
£190,999.00	1.35%	£1,071.66	£80,987.42	£18,587.89

if you are paying ~£32k in interest over the 10 tears it cannot be £30k more

I would say the worst case is more like £13k with regular 2y switching with great rates

if the Coventry is a 5+5,   then 5y £999 fee around Jan last year  say 1.5%

look over 5y when you can get out.

amount	rate	payment	owing	interest
£190,999.00	2.20%	£1,071.66	£145,282.70	£18,583.43
£190,999.00	1.50%	£1,071.66	£139,136.03	£12,436.76

around £6k over 5year  for 10years piece of mind because, if rate are still low you can switch at 5 and if they go up you start to claw some back. 

Grabs39

2.2% sounds a brilliant deal.  If base rates go up to 3 or 4% in 5 years time you will be far far better off than people on short deals.

dunstonh

10 year fix at 2.2% is great.  Nothing to worry about at all.

You do not buy a fixed rate mortgage to get the best terms in any short term period.  You buy it to give you the certainty of payment for the whole of that term.  

Nobli

Thanks everyone. You're right, peace of mind that it won't go up is worth quite a bit. I'll take a look at the overpayment calculator. You've been a great help and I'm glad I posted on here rather than stewing.

dimbo61

It's all relative, We had a 5 year Offset fixed rate deal only a few years ago at 4.74%
While many older people can remember interest rates of 17.00% in 1979
So 2.2% is a brilliant long term fix, building up a savings pot and consider overpaying if you have no other debts.
Time to enjoy life and stop worrying about your mortgage deal.
Well done 👍

Thrugelmir

Remember taking a 5 year fix in the 90's at 10.5%. Only to watch rates fall in the months that followed. Unfortunately hindsight has no value. At the time it was the right choice.