Making the most of a low rate mortgage

patchyX2

I have ~78k remaining on my mortgage with Santander. It's a 5 year fix that expires in Feb 2025, and the rate is 1.49%.

I'm in the fortunate position that I have the money in the bank to clear it, but I've chosen not to as it's earning more in interest than the 1.49% of my mortgage rate (and I would have a ~4k ERC). 

I'm wondering if I can take advantage of the this low rate somehow. Logging in to my mortgage account, I can see I can request to extend the term or switch to interest only. It says that there's a £75 charge to make a change, but would I be right in saying that if I were to do both (increase term and switch to interest only) and save the money on my monthly repayments into a savings account that returns more than 1.49%, then pay the whole amount off when I reach the end of the term, I'd be better off overall right? 

Also, would Santander allow me to make these changes, or do they only allow it if I'm struggling to meet my current payment schedule? 

housebuyer143

PledgeX2 said:

I have ~78k remaining on my mortgage with Santander. It's a 5 year fix that expires in Feb 2025, and the rate is 1.49%.

I'm in the fortunate position that I have the money in the bank to clear it, but I've chosen not to as it's earning more in interest than the 1.49% of my mortgage rate (and I would have a ~4k ERC). 

I'm wondering if I can take advantage of the this low rate somehow. Logging in to my mortgage account, I can see I can request to extend the term or switch to interest only. It says that there's a £75 charge to make a change, but would I be right in saying that if I were to do both (increase term and switch to interest only) and save the money on my monthly repayments into a savings account that returns more than 1.49%, then pay the whole amount off when I reach the end of the term, I'd be better off overall right? 

Also, would Santander allow me to make these changes, or do they only allow it if I'm struggling to meet my current payment schedule? 

I do not believe you can just get interest only as there are a lot of hoops to jump through and you need an acceptable repayment strategy. That might just be if you are struggling in which case you might find it's a blemish on your credit file. Might be the same for extending the term. I imagine the are for people in financial difficulty.

I would just leave it and continue to save your money as you are. It's hardly worth the hassle for the small gain you will make. 

K_S

@pledgex2 To stretch your term and convert a capital repayment mortgage to I/O, you'd need to go through a full underwriting process which involves meeting Santander interest-only criteria ( https://www.santanderforintermediaries.co.uk/products-and-criteria/mortgage-lending-criteria/ ).

Even if you met all the above, you'll also need to confirm that they would let you retain the same product/rate that you are on. 

PledgeX2 said:

I have ~78k remaining on my mortgage with Santander. It's a 5 year fix that expires in Feb 2025, and the rate is 1.49%.

I'm in the fortunate position that I have the money in the bank to clear it, but I've chosen not to as it's earning more in interest than the 1.49% of my mortgage rate (and I would have a ~4k ERC). 

I'm wondering if I can take advantage of the this low rate somehow. Logging in to my mortgage account, I can see I can request to extend the term or switch to interest only. It says that there's a £75 charge to make a change, but would I be right in saying that if I were to do both (increase term and switch to interest only) and save the money on my monthly repayments into a savings account that returns more than 1.49%, then pay the whole amount off when I reach the end of the term, I'd be better off overall right? 

Also, would Santander allow me to make these changes, or do they only allow it if I'm struggling to meet my current payment schedule?