Paying off my mortgage with an ERC

louby40
louby40 Posts: 1,503
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edited 21 January at 5:42PM in Mortgages & endowments
My house is currently on the market as I want to downsize after a serious illness (now recovered) and reducing hours at work. I do have an underlying health issue so there may be a time I need to apply for ill health retirement. So because of this I'd like to have no mortgage and build up some savings. 

I can still afford to live here comfortably but the house is now too big so there are a couple of reasons to downsize.

I have 12 years left on my mortgage and my current rate of 2.39% is fixed until May 2027. My balance is £58,840 with an ERC of £2969 - this will reduce on 30/4/2024.

I just want confirmation that I'm doing the right thing. I can still buy a decent house going forwards and I've included the ERC in my figures for selling/buying.

What will the ERC reduce to April? I'm not sure of the percentage. 

Thanks

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  • louby40
    louby40 Posts: 1,503
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    Also I have been overpaying since I re-mortgaged. Is this likely to affect the ERC?
  • user1977
    user1977 Posts: 13,377
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    louby40 said:

    I have 12 years left on my mortgage and my current rate of 2.39% is fixed until May 2027. My balance is £58,840 with an ERC of £2969 - this will reduce on 30/4/2024.

    I just want confirmation that I'm doing the right thing. I can still buy a decent house going forwards and I've included the ERC in my figures for selling/buying.

    What will the ERC reduce to April? I'm not sure of the percentage. 

    We don't know. You just told us it reduces then - how do you know? Presumably this was all detailed in your mortgage offer?
  • Spies
    Spies Posts: 1,973
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    It usually drops by 1% a year
    4.29kWp Solar system, 45/55 South/West split in cloudy rainy Cumbria. 
  • Letsgetmoving
    Letsgetmoving Posts: 51
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    Can you port your mortgage to the new house? It’s a great rate 
  • grumbler
    grumbler Posts: 58,629
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    edited 21 January at 10:01PM
    louby40 said:
    ... I'd like to have no mortgage and build up some savings. 

    ....

    ... my current rate of 2.39% is fixed until May 2027. My balance is £58,840 with an ERC of £2969 - this will reduce on 30/4/2024.

    I just want confirmation that I'm doing the right thing....
    Not the right thing IMO.
    Put this £59K to a fixed rate savings account and it will pay you about 4.5% p.a. - £2.65K
    Mortgage costs your 2.39% - £1.4K
    £1250 is your annual profit (will drop gradually) - that will help you to build savings.
    In 2027 use your savings to pay the mortgage off without any penalties, and you'll be about £5-6K better off (compared to paying it off now).

  • louby40
    louby40 Posts: 1,503
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    I over pay my mortgage by £150 every month so I'll potentially be saving £9000 a year which I aim to put into an ISA.

    I live in a 3 storey 4 bedroomed house. I'm a severe asthmatic so the stairs aren't great. 2 bedrooms and one bathroom aren't used in the house, doors are closed and radiators turned off.

    this house sale is not only driven by being mortgage free, it's also about my health and having a smaller house to manage. 
  • Baron_Dale
    Baron_Dale Posts: 899
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    edited 31 January at 8:12AM
    In my view if selling the house means you can buy another that improves the quality of your life does the payment of £2969 really matter? 
    As this is MSE asking your question about the ERC will inevitably receive answers that look at minimising financial loss or maximising financial gain. This is understandable, but not the be all and end all of everything.
    Go the way that brings you peace of mind and better health.
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