Repay mortgage in full or in part?

moneypenny2k

Please help my poor fiscally challenged pre Christmas brain.

I currently have a mortgage of £98710 which I have switched to a new lock in rate in November, thinking that I was going to be moving next year and could port the mortgage with me in case I needed to spend more on the new place.  However this has now changed and it looks like I'll probably be staying where I am.  

The problem is that as of January/February time, I should have enough money to repay the mortgage in full.  This of course will leave me with paying interest on savings interest if I just put the money in the bank.

So do I?

Repay the whole amount plus the early redemption charge of £1974 
OR
Repay the allowed 20% in each of the next 2 years thus reducing the debt and avoiding the extra charge and pay it off in full once the penalty period ends.

I think it's probably the former but I'm just doubting myself and need somebody to tell me if I'm right or not.

dharm999

What is the interest rate on the mortgage?  Do you have the option to switch to an offset mortgage from the same lender?

moneypenny2k

dharm999 said:

What is the interest rate on the mortgage?  Do you have the option to switch to an offset mortgage from the same lender?

Thanks for swift reply 6.29% and no I don't think I do

dharm999

At that rate, I would pay off the mortgage or switch to an offset with another lender and pay the early redemption charge.  Which to choose would depend on whether you might need the money in the next few years.

moneypenny2k

dharm999 said:

At that rate, I would pay off the mortgage or switch to an offset with another lender and pay the early redemption charge.  Which to choose would depend on whether you might need the money in the next few years.

Thanks, that's as I thought, just needed confirmation

Veteransaver

That's a fairly low early repayment charge and is only the equivalent of about 4 months of interest so I'd probably repay it asap.
Alternatively you could put the money in a 2 year fixed rate saver but you'd probably get about 5% now and likely be taxed on that so doubt you'd be better off overall over 2 years.
If you have any other debt at higher interest though it could be better to pay that off first.