Should I remorgage and pay a £2753 ERC?

Sam22022

Hi, 

Currently 4 years into a 5 year fixed mortage with a rate of 3.15%, £137,669.54 left to pay. 5 year fix ends in February 2023. 27 years roughly remaining. Paying £638 a month. 

To come out of my current mortgage early I have to pay a 2% ERC, £2,753. 

I've done the Martin Lewis ditch your fix calculator and based on the above I shouldn't remortgage unless it's a rate of 1.13% or less BUT I'm looking to borrowing more on my mortage so increasing the mortage to £170k for home improvements and to consolidate a few debts. My home is worth £230,000.

I've been offered rates for a £170k mortgage of 1.49% on a 5 year fix(£755pcm) and 1.71% 2 year fix(£773pcm) both over 22 year so reducing my term by 5 years on both rates.

Can someone point me in the right direction, I understand it's a preference but is it really wise to pay a £2,753 to leave my mortage 12 months early for a 1.49% or 1.71% mortgage with additional lending of £30k.

Or do I just carry on until nearer the time my 5 year fix ends and reconvene? 

Any guidance would be helpful. 

Sam22022

My only worry with going with another 5 year fix is that we will probably of outgrown our home by then so would look to be moving so we don't want to have to pay another ERC, and also by borrrowing more on the mortgage we are taking a lot of equity away so would be left with £60k and house prices seem to be rising and the next house we get will no doubt be more expensive.

getmore4less

Forget the MSE ditch the fix it does not tell you what you need to know.

the rate needed to break even over 12months is not a lot of use.

what you need to know is what rate do you need if you switch later to be no worse of from switching now.

A few bits of missing information.

are you sure the 2y(1.71%) is more than the 5y(1.49%)?

What rate are they offering you for just the top up?

What fees on those rates, given the amount and rate going with £999 for the initial calc.

What are the payment plans because you have to use actual payments notthe one for full tem.

The simple 12m+new deal -V-  ERC and a 5y option now with say a £650 payment.

Mortgage	£137,669
payment	£650	ERC/FEE
rate	3.15%	£2,753
new rate	1.49%	£999
Time	Years	months
Left on current	0	12
New fix term	5	0
amount left after(months)		12
Start	rate	End
£137,669	3.15%	£134,155
£141,421	1.49%	£135,689
amount left after(months)		60
£137,669	3.15%	£118,940
£141,421	1.49%	£111,889
Switch when ERC £0
Break even rate needed no fee and fee)		48
£134,155	1.810%	£111,889
£135,154	1.601%	£111,889

Do you think in one years time you will be able to get a new fix(with fee) for 1.6%

That lower rate for 1 year recovers most of the fee just £535 left

Other factors, 
what will you save on your debt interest for that year if you add it to the mortgage.
(don't forget paying it over a longer term often costs more if you don't overpay)

how time critical is the extra for improvements, there is utility value in doing it now.

Sam22022

The 1.71% 2 year fix is £773 a month

The 1.49% 5 year fix is £755 a month

Both with no fees, both over 22 years and both based on a 170k mortgage

What rate are they offering you for just the top up? What does this mean? 

Thank you for your reply, sorry I'm new to the above so just trying to get my head round it

Exodi

A lot of lenders offer a 'further advance' which is, in effect, a second mortgage that will be running on a different term on a different deal.

The reason I mention this is that it allows you to raise additional funds against your property without the issue of ERC's (as you don't need to discharge your primary mortgage).

Edit - For example

Nationwide: https://www.nationwide.co.uk/mortgages/borrowing-more
Natwest: https://www.natwest.com/mortgages/manage-your-mortgage/borrowing-more.html
Barclays: https://www.barclays.co.uk/mortgages/existing-customer-centre/additional-borrowing
Lloyds: https://www.lloydsbank.com/mortgages/existing-customers/additional-borrowing.html

You get the idea.

getmore4less

Sam22022 said:

The 1.71% 2 year fix is £773 a month

The 1.49% 5 year fix is £755 a month

Both with no fees, both over 22 years and both based on a 170k mortgage

What rate are they offering you for just the top up? What does this mean? 

Thank you for your reply, sorry I'm new to the above so just trying to get my head round it

Which lender make it easier to look up things.

What rates are they offering with a fee, often 5y are cheaper with a fee at this level of borrowing and 2y no fee unless higher lending. 

Unusual for a 2y to be more than a 5y 

as explained  most lender offer additional borrowing independent of the main deal and avoid ERC.

Bluebell1000

Does your ERC go down to 1% from Feb 22? That would change the calculations.

You may be able to port your mortgage if you move (i.e. take it with you) and borrow extra at that point if the house you wish to buy is more expensive.

Thrugelmir

How much debt are you looking to consolidate? Generally speaking mortgage lenders will decline additional lending for this purpose. 

getmore4less

Thrugelmir said:

How much debt are you looking to consolidate? Generally speaking mortgage lenders will decline additional lending for this purpose. 

they already have an mortgage offer for £170k


Bluebell1000 said:

Does your ERC go down to 1% from Feb 22? That would change the calculations.

You may be able to port your mortgage if you move (i.e. take it with you) and borrow extra at that point if the house you wish to buy is more expensive.

it does make a big difference if the ERC drops to 1%

Save and extra £900 on top of paying the ERC back then needs rates to drop in the next 12 months to make sticking worth while.

Doing it for no fee 1% ERC.

Mortgage	£137,669
payment	£650	ERC/FEE
rate	3.15%	£1,377
new rate	1.49%	£0
Time	Years	months
Left on current	0	12
New fix term	5	0
amount left after(months)		12
Start	rate	End
£137,669	3.15%	£134,155
£139,046	1.49%	£133,279
amount left after(months)		60
£137,669	3.15%	£118,940
£139,046	1.49%	£109,330
Switch when ERC £0
Break even rate needed no fee and fee)		48
£134,155	1.305%	£109,330

The extra borrowing is a different calc.

if moving will the money for refurb help the price. 

Moving complicates 

getmore4less

Sam22022 said:

Hi, 

Currently 4 years into a 5 year fixed mortage with a rate of 3.15%, £137,669.54 left to pay. 5 year fix ends in February 2023. 27 years roughly remaining. Paying £638 a month. 

To come out of my current mortgage early I have to pay a 2% ERC, £2,753. 

I've done the Martin Lewis ditch your fix calculator and based on the above I shouldn't remortgage unless it's a rate of 1.13% or less BUT I'm looking to borrowing more on my mortage so increasing the mortage to £170k for home improvements and to consolidate a few debts. My home is worth £230,000.

I've been offered rates for a £170k mortgage of 1.49% on a 5 year fix(£755pcm) and 1.71% 2 year fix(£773pcm) both over 22 year so reducing my term by 5 years on both rates.

Can someone point me in the right direction, I understand it's a preference but is it really wise to pay a £2,753 to leave my mortage 12 months early for a 1.49% or 1.71% mortgage with additional lending of £30k.

Or do I just carry on until nearer the time my 5 year fix ends and reconvene? 

Any guidance would be helpful. 

Another thought

£137,670 is just under 60% LTV what rates can you get for that?
£170,000 is juts under 74% LTV

Might be able to renew at 60% rates and get the extra at 75% rates but some lenders have a restrictions on extra borrowing soon after  remortgage/switch 

Sam22022

Bluebell1000 said:

Does your ERC go down to 1% from Feb 22? That would change the calculations.

You may be able to port your mortgage if you move (i.e. take it with you) and borrow extra at that point if the house you wish to buy is more expensive.

Hi, no the ERC stays at 2% for the last year