Pay the early repayment charge or stick with TSB

frenchbaguette

Through a combination of ignorance, not 100% clear advice and a huge desperation to just get the move done and dusted as fast as possible with a newborn in a pandemic, we made a poor choice last year when we moved to port our mortgage to avoid a 4.5k early repayment charge but then also fixed the second subpart of the mortgage for 5 years. We didn't really understand what it meant but now all has become clear now our fixed rate for the subpart one (and considerably larger portion of the mortgage) has come to an end. The deals we are being offered to transfer our subpart 1 onto through the same lender are not competitive and there are significantly better deals available elsewhere but obviously we can't have two lenders caring for one house, we would need to remortgage entirely and pay the early repayment charge for subpart 2 which of course is much higher than we would otherwise like it to be because we foolishly fixed for 5 years instead of 2 or not at all. 

So to sum up, we're basically looking at paying £3000 up front and then saving £100 a month or paying the same monthly than we already are to stay with out current lender. 

The difficulty is, we had a small child in full time childcare and we want to start trying for baby 2 in the next few months so life is expensive at the moment and only going to get more expensive. We can afford our current mortgage but we can't save very much at all and if and when baby 2 comes along we won't be able to save anything until at least our first child starts full time school. We have £7000 in an emergency fund so we could pay the £3000 fee, but it would be a huge dent in our savings where we won't be able to save it up that easily again. I know the £100 a month will slowly add up to £6000 over the course of 5 years so in theory it's a no brainer that we should pay the charge but realistically, if we do have an emergency in the next few years when everything is so tight whilst we just survive these childcare and maternity years, a lump sum feels of more use to us than £100 a month. 

What would you do please? 

steampowered

What interest rate is your existing lender offering you on the first part of the mortgage if you take a new fix with them?

When does the lump sum reduce? The repayment charge will usually reduce each year over the 5 year term.

dimbo61

Rates have never been this low and I find it a little hard to believe you will save much once you take into account the full costs of changing lenders.
ERC, exit fee, legals to change lenders, Fee for new deal which you might need even get.
Some lenders offer great rates but are very very hard on lending criteria.
I would also hate to hand any lender £3,000 of my hard earned money.
If you can post the figures and lenders 
I would rather overpay every month and have the security of a long term fix while your child/children are in nursery/pre school with the costs involved

getmore4less

Need a lot more information to work out if changing lender would work.


Full details of current mortgage,
What are tsb offering for the new property
What are alternative lenders offering.

LTV will be important because you could just borrow more if you want to retain savings.

You can also look at longer term if cashflow is tight.

london21

Personally I will hate to pay early repayment charge.
Be mindful of some lenders looking like they offer great rates all depend on many factors such as LTV, thier criteria and if you meet them all etc.