Product switching hack/fee

stud26

I have until March 2026 on my current mortgage rate of 1.85%. We've paid about half of it off since taking out the product, no overpayments. I see that our monthly payments would be a lot less now if we were on a new product at 4.16%. Couldn't believe it at first, then realised this is because it's calculated on the current balance.

Can I switch to that product now, and would I have to pay an exit fee? If so, how much is that likely to be? I would call the lender but it's nearly 10pm and I'm too eager/impatient to see if I've found a money saving hack.

Can't wait to pay it off.

Thanks in advance.

housebuyer143

1.85% is lower than 4.16% so I don't really understand what you are saying. Why would you want to switch to a rate over 2x higher than what you currently pay? 
In no world is it better to switch to a higher rate unless you are talking about savings accounts 

Edi81

That doesn’t sound right. Who is the lender?

400ixl

That makes no sense at all.

The only way that payments for a higher interest rate are lower is if the term is them longer.

stud26

Currently paying £310 at 1.85%. Based on initial £65,000 borrowing. 

Now we owe just £36,000. A rate of 4.16% equates to payments of only £237, saving us £73 per month. Surely that's a win???

Why wouldn't you switch? (Unless exit fee is too expensive)

UPDATE: for my sanity I just ran the numbers through a mortgage payment calculator and it returned the same figures.

ACG

You must be doing something wrong. 
When you say you have paid off half, where are you getting that figure from? If you are doing £310 x by however many months, that is not how you work out the balance as some of that £310 would be interest. 

If you are getting a lower repayment with a higher interest rate, you are not comparing like for like.

400ixl

What is the term of each?

The 4.16% must be over a much longer period. So you may save on monthly oayments, but will be pating for a lot longer, costing you far more overall.

400ixl

£36k at 4.16% on a payment of £237 per month means a term of 18 years and a total pay back of £51.25k

£36k at 1.85% on a payment of £310 per month means a term of 10.7 years and a total pay back of £39.8k

So either you are not comparing the same outstanding balance or the length of mortgage is different.

stud26

Initial term 21 years 1.85%. Now 18 years at 4.16%. 

It's because the current payment was initially based on a £65,000 mortgage and the new payment would be calculated just on the remaining £36,000. Plug in the numbers yourself into a mortgage calculator and see.

Actually, I think there was an overpayment, but that doesn't affect this. I could still save by switching early.

But going back to my initial question, how much are exit fees?

user1977

stud26 said:

But going back to my initial question, how much are exit fees?

Go find your mortgage offer and read it to find out.

400ixl

You are still not doing it right as I showed. You must be 10 years into your initial term, so will only have 11 years left to pay at £310 compared to a new term of 18 years meaning you may pay less per month but will be paying for an additional 7 years and £12k in interest in total.

That is not a good deal in the long term.

As for exit fee's, only you can tell that as it will be what you signed up for, so read your mortgage T&C's.

Either way you'd be mad to go that way if you can afford the £310 a month.