Redemption Penalty workaround

MarkyMarkD

Drawdowns aren't underwritten. Either your mortgage allows them or it doesn't. I can simply ask for money whenever I want, up to the amount that I've overpaid during the entire life of the mortgage.

Not wishing to bang on, but only you (jamesd) have used the word "investments". The OP said "savings and ISAs" which may both well mean "cash" as it does for well over 75% of people who have ISAs.

jamesd

MarkyMarkD wrote: »

Drawdowns aren't underwritten. Either your mortgage allows them or it doesn't.

I've read of cases where it is discretionary in the mortgage contract. May not apply to yours, though.

MarkyMarkD wrote: »

The OP said "savings and ISAs" which may both well mean "cash" as it does for well over 75% of people who have ISAs.

Perhaps you're right and I've read too much into the distinction he made between the two. If I'd meant cash ISA I'd have written something like "savings, of which x is in cash ISAs".

gil13

I have ISA's, both cash and S&S, plus UT's. ..But anyway, think we have flogged this one. Was looking at all the options available even if some of them had a cost associated, was also looking to keep the flexibility of having an easily available cash cushion. Unlike MarkyMark I wanted to keep the Cash ISA's intact because of the tax shelter which will last beyond the mortgage term, whilst I see and accept the benefit of reducing capital. I was just looking at a plan short term over the next 3 years of keeping the cash flow in order, then once beyond the tie in period to hopefully attack the capital or hopefully that together with remortgaging to much lower rate than SVR. It's all swings and roundabouts really I suppose and I could probably have asked a simplier question and got the answer I needed but hey ho.

MarkyMarkD

I've not read of cases where drawdowns are discretionary. It's a useless product benefit if it's not contractual IMHO. Certainly doesn't apply to mine: phone or e-mail and the money's in my current account within a couple of days and no fees.

gil13 I've seen other posters on here who speak wisely about preserving the tax status of their ISAs. But this only makes sense if you:

(a) think the government is going to change the ISA rules, and stop new subscriptions - in which case they might just as likely change it retrospectively anyway; or
(b) think you'll be fully funding your ISAs every year in the future one you finish paying your mortgage.

I don't think that (b) actually applies to that many people, so preserving the existing tax shelter is fairly academic.

gil13

Preserving a tax shelter is not academic, we are all taxed enough as it is. So we'll have to agree to disagree on that one. I suspect if you went over to somewhere like the Motley Fool you might find quite a few that would advocate running a mortgage as long as possible as it is one of the cheapest long term loans you will ever get. Investing over the term certainly must have it's place. It seems to be the new trend to pay off the mortgage as quickly as possible and this is certainly not to be dismissed, a very good endeavour. But the majority of people are not in a position to actually pay off vast lumps from them mortgage and over a term of a typical mortgage they should really be investing for a stock market return as well.

Clearly you think your way is best and as you are the type that always likes to have the last say I would say be my guest, I doubt you will be able to resist the opportunity. But if like me you think we have pretty much done this one then shall we now put it to bed.

Dan_Collins_2

This thread has got way to complicated to follow. Is it a fight over who can come up with the most complex of ideas or are we helping the OP??

Going back to first post, why did you take out a product with an extended tie? You must feel a prize plonker! ;-)

However what is done is done. No point paying an ERC if you dont have to so I/O is your best option. If or while you can afford it, make overpayments over wise your mortgage will stay as it is and the 3 years your tied in to would have been wasted. The longer you have the mortgage the more you pay back.

Whats the point in having loads of savings if what your earning from them is going out the other end on your mortgage?? Get rid asap, but I agree not everybody can make lump sum payments, and you should have some back up money!

I am not trying to have the last say, just giving some SIMPLE advice!

Dan_Collins_2

Drawdown can be underwriten but in these cases it is normally subject to a time limit. The drawdown products have it in built!

jamesd

Dan_Collins, no need for someone to be a plonker just for taking out a mortgage with a discounted initial rate and tie-in at SVR, effectively borrowing money in the early years then repaying it and a bit more during the tie-in. Money has a time value and we know that gil13 has been saving and investing money. It's entirely possible that the savings and investments made using the money from the lower initial interest rate will exceed the extra cost during the SVR period. Add in the reduced need to find money in the early years and the possibility of pay raises that may make it easier to fund SVR now than it would have been to fund a non-discounted initial rate and it could well have been an entirely sensible and correct choice.

It just needs the correct analysis and reasoning on the part of the borrower for this to be the best product available for their needs. That would not include someone with no expectation of salary increases and an inability to pay more than the discounted rate, though... that's repossession and US sub-prime bust territory and I assume mis-selling also, in the UK.

I'd be happy to have this type of product if I thought that it'd leave me better off after combining expected mortgage costs with expected investment returns and other time value of money considerations.

Dan_Collins_2

jamesd wrote: »

Dan_Collins, no need for someone to be a plonker just for taking out a mortgage with a discounted initial rate and tie-in at SVR, effectively borrowing money in the early years then repaying it and a bit more during the tie-in. Money has a time value and we know that gil13 has been saving and investing money. It's entirely possible that the savings and investments made using the money from the lower initial interest rate will exceed the extra cost during the SVR period. Add in the reduced need to find money in the early years and the possibility of pay raises that may make it easier to fund SVR now than it would have been to fund a non-discounted initial rate and it could well have been an entirely sensible and correct choice.

It just needs the correct analysis and reasoning on the part of the borrower for this to be the best product available for their needs. That would not include someone with no expectation of salary increases and an inability to pay more than the discounted rate, though... that's repossession and US sub-prime bust territory and I assume mis-selling also, in the UK.

I'd be happy to have this type of product if I thought that it'd leave me better off after combining expected mortgage costs with expected investment returns and other time value of money considerations.

So why is he trying to get out of it?? The lender wins everytime!