HSBC mortgage - am I doing the right thing?

snickersbars

Hello wise Forumites,

Before I go ahead with any remortgage, I'd appreciate confirmation / dissent on my thoughts & situation.

• Took out an £89,000 mortgage with HSBC in October 2018. 5(ish) year fix at 2.05% (£297 per month repayment), 35 year term. 10% yearly fee-free overpayment possible; the 10% is based on the balance each October, not on initial balance.
• I've been overpaying it well, and 32 months in, have got the mortgage down to just over £70,000. 29 months remain on my fix.

Obviously interest rates have dropped since I took out this mortgage. I had a look today, and a product open to me is the HSBC 5 Year Fixed Fee Saver - 1.39% fix. I like the idea of fixing my interest rate for a longer time as we're about as low as it can go. My income is likely to only remain steady or decrease. Ideally I'd love to have the mortgage cleared in about 10 years, but I don't want to commit to that due to mild income concern.

I phoned HSBC to enquire about this, and was told:

• Redeeming my current mortgage product today would cost me an Early Repayment Charge of £1,701.
• To just switch rates, I wouldn't need to go through any special acceptance process - I can just do this online myself on my account using their form.
• My monthly repayments (for the duration of the fix) on the new product if switched would be £224.79, compared to my current £297 per month.
• To switch rates AND reduce the mortgage term, I'd need to speak to one of their mortgage advisors.

My questions are:

1. I believe even with the Early Repayment Charge, it'd still be a saving to switch rates. (£297 * 29 = £8,613) vs (£224.79 * 29 = £6518.91, plus ERC £1,701 = £8219.91). Have I gone wrong anywhere on that?
2. Is there any advantage to decreasing the mortgage term to e.g. 20 years vs the 32.5 it is now, rather than just overpaying the maximum 10% allowed as I have been doing?
   
3. It sounds almost 'too good to be true' that I can just click a few buttons and switch over rates without any checks / acceptance needed. Is that normal if not changing providers?
4. Any benefit in speaking to their mortgage advisor?

Thanks for reading and any thoughts!

IAMIAM

For the sake of 400 I would wait until deal finishes 

getmore4less

 Have I gone wrong anywhere on that?

You can't just use the difference in payments and as you are overpaying that changes the numbers in favour of staying with what you have

also if HSBC tier their ERC that changes the calculations if it drops in Oct. ( 2.5% is unusual ERC)

lets keep it simple £70k, £1701 ERC, £300pm  2.05% against 1.39%   2y5m

the max saving is interest only £70k * 0.0066 *  (29/12)  = £1116.5

You cannot get the ERC back in 29 months  £585 short



Its the standard fee/no fee calculation to find the real amount short which is will be on repayment 
add the fees make the payment the same

amount	rate	payment	owing
£70,000.00	2.05%	£300.00	£64,640.84
£71,701.00	1.39%	£300.00	£65,306.46

~£660  worse of switching.

pop in a £200pm overpayment 

amount	rate	payment	owing
£70,000.00	2.05%	£500.00	£58,699.96
£71,701.00	1.39%	£500.00	£59,411.41

~£710 worse off.

up  the payment to £700

amount	rate	payment	owing
£70,000.00	2.05%	£700.00	£52,759.09
£71,701.00	1.39%	£700.00	£53,516.37

~£760 worse off

the next calculation is what can the rates go up to in 2y5m to be no worse off over the next 2y7m
using £500 payment target to hit will be £45,810

amount	rate	payment	owing
£58,700.00	1.92%	£500.00	£45,804.67

No Fee 5y fixes need to go up more than 0.53% in the next 2y5m  to be worse off.


the other thing you have done wrong is use £297 in your calculations
(that looks like the payment before your ovepayments and it has not been recalculated)
 
for 32.5 year term it would look like this.

amount	rate	payment
£70,000.00	2.05%	£246.46
£70,000.00	1.39%	£223.63

 
£297  is equivalent to full term 25y2m and that looks like

amount	rate	payment
£70,000.00	2.05%	£296.89
£70,000.00	1.39%	£274.82

The real difference in payments is closer to £20(not the £72 you used)  around £580 saving rather than ~£2.1k you got