Overpay after Mortgage Deal ends?

paperclap

Hi all,

I'll try to keep this short and sweet!

We're moving country. So, we're selling our house.

Our fixed mortgage deal (5 years, 1.56% rate) will be ending the end of May. When this happens, Halifax will automatically place us on to their Standard Variable Rate (which I believe is 7.99%).

We have £154,000 left to pay off.

This means we'll be jumping from a monthly payment of £765 to £1,315 (based on £154,000 remaining, over 19 years).

However, we have £84,000 in savings.

The minute that our fixed deal ends, would it be wise to overpay by £84,000? Bringing the remaining down to £70,000.

In turn, we'll go on to monthly payments of £598 (based on £70,000 remaining, over. 19 years, on the 7.99% SVR).

When we sell the house, we'll get that £70,000 back.

But during the time the house is on the market, we won't be paying so much.

Good idea? Or am I missing something?

Thank you in advance.

grumpy_codger

No, you aren't missing anything. With the mortgage interest rate higher than your savings interest rate it does make sense to overpay as much as possible, but leave some savings as an emergency fund.

Hoenir

Seems a good idea. As remaining on the SVR would be costly. 

paperclap

Hoenir said:

Seems a good idea. As remaining on the SVR would be costly. 

Well, we would technically still be on the SVR. But, it wouldn't nearly make the same negative impact, as we'd effectively be "borrowing" less.

Hoenir

paperclap said:

Hoenir said:

Seems a good idea. As remaining on the SVR would be costly. 

Well, we would technically still be on the SVR. But, it wouldn't nearly make the same negative impact, as we'd effectively be "borrowing" less.

Interest accrues every day. The less you borrow the less you'll pay. 

paperclap

Hoenir said:

paperclap said:

Hoenir said:

Seems a good idea. As remaining on the SVR would be costly. 

Well, we would technically still be on the SVR. But, it wouldn't nearly make the same negative impact, as we'd effectively be "borrowing" less.

Interest accrues every day. The less you borrow the less you'll pay. 

Exactly that!

Yorkie1

It might be worth seeing whether you can go onto a tracker or similar retention product with your current lender, which has no early repayment fee, but has an interest rate lower than the SVR. That would help cut repayments until you sell?

paperclap

Yorkie1 said:

It might be worth seeing whether you can go onto a tracker or similar retention product with your current lender, which has no early repayment fee, but has an interest rate lower than the SVR. That would help cut repayments until you sell?

Trackers still have early repayment charges unfortunately.