First Direct chunky lump payoff? off 23 April 2021 at 6:12PM in Mortgage-free wannabe 1 reply 106 views

martsmithguitar

Hi,

Looking for some advice, I have a 20 year 92k mortgage with First Direct fixed at a great rate for 10 years, 9 left on rate. I have a lump sum of 60k I am considering paying off the total, I have spoken to F.D and there are no penalties for this (amazing company). 
Option 1- I can pay this amount via a standing order and dont need to contact them, my monthly payments stay the same and it will be paid off earlier (will have to keep 1k in there for the remainder of the fixed rate to avoid early repayment charges)
Option 2 - I contact F.D and tell them what I have paid off and I want it recalculated, this will reduce the monthly amount significantly and I can overpay what ever I like monthly if I want to.

What are the pros and cons of the 2 options please?

Ps - I will still have some savings after the 60k so won't be leaving myself short

TIA 

caeler

It's such a personal decision.  For me I reduced the term with overpayments but I know many others who choose to reduce the monthly outgoing amount.  I think it depends on how much flexibility you need for the future.  Great news that you can make a substantial overpayment without an ERC!