Choose a 10 year Fix.. Pay it off early? With a twist..

Croftys

I have 39k left to pay off an original value of 55k With the intent to overpay £5500 per year as agreed by my lender without penalty.

The twist? well I'm offered:

5.89% 3 year fixed, 5.30% 5 year fixed or 5.24% 10 year fixed.

MSE overpayment calculator has me finishing the mortgage at year 5/6.

I'm technically not hitting an ERC threshold, by choosing 10 Years to secure a lower rate.. Although the mortgage would be repaid earlier than the 23 years left to run on the mortgage, and half way through a 10 year rate!

Thoughts?

Sg28

Normally you can only overpay 10% of the outstanding balance. Not 10% of the original balance. 

Newbie_John

Few things to double check:
- what % can you overpay yearly?
- is it % of borrowed amount or what's left every year?
- there could be a fee if you overpay your mortgage in full during the fixed period - so dbl check that, you may want to leave low amount for 10 years to avoid it

First things first, you took £55k mortgage for 23 years while being able to overpay £5500 a year extra? What was the reason behind it?

Beetroot_24

Sg28 said:

Normally you can only overpay 10% of the outstanding balance. Not 10% of the original balance. 

Nationwide allow 10% of the original balance. 

Edi81

With a balance of £39k the interest element will be pretty similar with all of the fixed rates. I’d take the 5y fix in that case. 

Croftys

Thanks all, so yeh we took out a 2nd charge for 55k 3 years ago for building work. Subsequently the 2% initial rate is ending in March next year. Nationwide allow 10% of the original borrowed amount without ERC.  And in March I will putting 10k out of savings (currently in a 5%fix) fee-free to get the balance down. Then, rather than saving the 500 per month, I’m looking to use it as overpayments. I’m gambling a little that the savings rate will drop, and my mortgage rate will overtake any real savings gains. 

My main aim is to clear it before my 1st charge rate is up for renewal in 5 years. 

Hope that clears up a few questions. I guess I will probably choose 3/5 years and again use the option to overpay a chunk fee-free. I mean, it can’t be any worse in 3/5 years…. right? ….. Right?