Mortgage mistake: any options?

Cranberryberry

Ever since buying our first home I’ve been keen (other half would say obsessed!) with getting rid of our mortgage. On that basis when we last re-mortgaged we went for a 10-yr fix over a 12yr term - the highest we could afford. 

We’re on year 3 and I realise my mistake here. Whilst we can pay the monthlies (£1550 a month) it’s a huge whack of our outgoings and I can see now that we could have actually gone for a far longer term, same fix, and overpaid or otherwise saved in order to pay off at the same point. 

The difference being that we wouldn’t be tied to the minimum payment which brings huge stress as losing our income would mean needing to get a similar level of pay straight away. 

Our ERC would be around £7.5k - and it’s definitely not worth it even with the lower interest we would get now. So I feel like I’m stuck for another 7 years. 

Am I right here? My only options are to carry on, or remortgage with a hefty ERC which would be ‘wasted’? 7k is a lot of money for peace of mind, especially if we don’t need it. 

Thanks!

[Deleted User]

although the interest rate is fixed for 10 years, the underlying mortgage term isnt.  You should be able to contact your lender and extend the overall term.  They might do a new affordability check but there shouldnt be any reason to refuse. 

Cranberryberry

Thanks. Seriously? That would be amazing - I’d never considered that option. I’m with nationwide so I will contact them. 

[Deleted User]

https://www.nationwide.co.uk/support/support-articles/how-to/change-your-mortgage-term-time

you can even do it yourself online  https://switcher.nationwidemortgages.co.uk/login

Shouldnt take more than 5 minutes online.  Helped a client with it a few weeks ago

Cranberryberry

Wow. Thanks again - is it automatic or does it just trigger some manual process?

getmore4less

Always worth a ditch the fix calculation what rate and amount outstanding and ERC(does it change and when)

looked like it would pay off when you asked in Dec

https://forums.moneysavingexpert.com/discussion/comment/77848076/#Comment_77848076

redo the numbers when the ERC drops in May.

Cranberryberry

getmore4less said:

Always worth a ditch the fix calculation what rate and amount outstanding and ERC(does it change and when)

looked like it would pay off when you asked in Dec

https://forums.moneysavingexpert.com/discussion/comment/77848076/#Comment_77848076

redo the numbers when the ERC drops in May.

The calculator did but when I actually went through a broker it was clear that it didn’t. It seemed that because of the short term I have (and overpayments made) it wouldn’t save the ERC even later this year. 

getmore4less

Even with the £1500pm payment it looked like there were rates that make it worth while.

If the ERC drops in May  a drop in rate  from over 3% to 1.49 % over 7 years will probably cover any fees and the ERC.
Definitely redoing the numbers in preparation in case it does work out cheaper.

You should have posted the broker calculations  on your other thread.

They don't always get them right.

getmore4less

Will have another go based on 7years left to go in May
Dec you were around £137k  and ERC was around £9k  and now you say £7.5k
Nationwide 3.6%  current payment around £1,500 but looking to change.

Looks like the ERC is 6% now and after May(if  y4) 
They did change 1 Feb  and before that you need to look it up for your deal

Lets go with £130k  and 7 years with 6% ERC £7,800

looking at options NW have 1.49% no fee and 1.24%  £999 fee

Make the term 7 years so max payment before overpayments
This is the situation at end of 5 years

amount	rate	payment	owing
£130,000.00	3.60%	£1,753.11	£40,537.01
£137,800.00	1.49%	£1,753.11	£39,317.78
£138,799.00	1.24%	£1,753.11	£39,214.23

changing makes you around £1k better off  at end Y5

The follow on rate for the next 2y to break even can go as high as 6.65% that's a rise of over 5% on current 2year rates.

Then there is the  60% LTV Barclays  7y fix 1.49% £999 fee as direct 7y comparison.

amount	rate	payment	owing
£130,000.00	3.60%	£1,753.11	£1,747.86
£138,799.00	1.49%	£1,753.11	£686.44

that has you £1k ahead at 6y11m but there  will probably be other  remortgage fees. 

What are you payment plans with this change of term to make the contractual lower.


Struggling to see why you can't save money with a switch  unless your planned payments are going get closer to £2.1k  or you have paid off a lot more of your mortgage  around £115k is break even in 5 years

amount	rate	payment	owing
£115,000.00	3.60%	£1,550.83	£35,859.66
£122,800.00	1.49%	£1,550.83	£35,750.68

Cranberryberry

Thanks again - and particularly for the detailed breakdown. Basically, the broker said that because we wanted to extend the term and the ERC (which you’ve worked out spot on!) it wasn’t possible to recommend. I think this was largely on the basis that our ‘normal’ overpayment isn’t guaranteed (we can stop it we want).

Don’t get me wrong, I will be looking in May when our ERC hits the next year but it’s a huge relief to be able to dip down the committed payment as Deleted_User has highlighted for now!

getmore4less

Can you provide some real information on your mortgage  like the  ERC regime.

If it does not change in May probably worth changing now.

Your predicted payment profile will be critical.
As will the starting amount as that determines no fee/fee

I did one last week and paying the ERC on overpayments was  only worth doing for a couple of months after the ERC dropped 1% each year.