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  • FIRST POST
    • mumofthetwins
    • By mumofthetwins 11th Feb 18, 6:32 PM
    • 1,019Posts
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    mumofthetwins
    Advice on payment term and op ?
    • #1
    • 11th Feb 18, 6:32 PM
    Advice on payment term and op ? 11th Feb 18 at 6:32 PM
    Hi guys
    At present I have a mortgage with Halifax 34900 on a 100000 house (this valuation was prior to the orangery i had on the back and double story side extension) I have looked online as my fixed rate is up in 3 months and I want to try to fix in asap.
    Initially I was thinking of reducing the term from 7 years to 5 years but I'm now considering just keeping it at 7 years and making the maximum op per month is there any pros or cons to this ?
    The other thing I wasn't sure on way wether to go 2 year fixed rate or 5 year fixed rate, there is very little difference in the interest rate but I was hoping that op would take me to near finishing it by the 5th year and hopefully I will have enough in savings to pay off any remaining balance.

    Sorry for all the questions .. my ex husband used to arrange all the money stuff so I'm a wee bit clueless

    Lisa x
    DFW
    May 2585/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
Page 1
    • juniordoc
    • By juniordoc 12th Feb 18, 3:17 AM
    • 364 Posts
    • 286 Thanks
    juniordoc
    • #2
    • 12th Feb 18, 3:17 AM
    • #2
    • 12th Feb 18, 3:17 AM
    It depends how disciplined you are with yourself. If you go for a 7 year fix but always overpay, you would actually repay in closer to 5 years and save on interest. If you choose a 5 year term you are in effect locking yourself in to these extra repayments, so you might have less ability to cope with unexpected costs, car breakdown, roof repairs etc, but will remove the temptation to spend what you would use for overpayments on other things.
    You could look at lenders offering a 3 year fix if you wanted a compromise between 2 and 5.
    • mumofthetwins
    • By mumofthetwins 12th Feb 18, 9:09 AM
    • 1,019 Posts
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    mumofthetwins
    • #3
    • 12th Feb 18, 9:09 AM
    • #3
    • 12th Feb 18, 9:09 AM
    thanks juni ..

    I was sort of thinking that .. if I did the 5 year fix rate over 7 years and set up a dd to overpay per month then I could always cancel if I really needed to .. hopefully not but you never know. I also have a loan finishing in 3 years so the normal payments for this I was going to save and hopefully that would clear the balance.


    thanks again
    Lisa x
    DFW
    May 2585/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
    • dimbo61
    • By dimbo61 12th Feb 18, 9:19 AM
    • 9,880 Posts
    • 5,315 Thanks
    dimbo61
    • #4
    • 12th Feb 18, 9:19 AM
    • #4
    • 12th Feb 18, 9:19 AM
    With a balance of 34900 it maybe cheaper to stay with Halifax and take a 5year fix. Not sure what the rates are with Halifax but even paying exit fee and other costs to move mortgage may outweigh any savings on interest rates.
    You could set up a direct debit to overpay every month but be aware of the 10% limit most fixed rate deals allow.
    With less than 50%LTV you should get a deal of about 2%
    • mumofthetwins
    • By mumofthetwins 12th Feb 18, 10:02 AM
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    mumofthetwins
    • #5
    • 12th Feb 18, 10:02 AM
    • #5
    • 12th Feb 18, 10:02 AM
    thanks dimbo .. I was thinking I would be better sticking and the rate was around 2.19% which I didn't think was to bad. It is 10% op but im assuming that the 10% is per year ? .. might need to check this ?
    Lisa x
    DFW
    May 2585/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
    • Thrugelmir
    • By Thrugelmir 12th Feb 18, 10:09 AM
    • 58,528 Posts
    • 51,886 Thanks
    Thrugelmir
    • #6
    • 12th Feb 18, 10:09 AM
    • #6
    • 12th Feb 18, 10:09 AM
    Maximum overpayment is normally 10% of the balance owing at the beginning of the year.

    Becareful though. Easy to trip up and incur penalties. As the lump sum will reduce the amount of interest charged. Following normal monthly repayments made in the same year will pay off more capital as a consequence.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • getmore4less
    • By getmore4less 12th Feb 18, 10:19 AM
    • 32,037 Posts
    • 19,225 Thanks
    getmore4less
    • #7
    • 12th Feb 18, 10:19 AM
    • #7
    • 12th Feb 18, 10:19 AM
    Run the numbers and see what the difference in costs are between the options.

    With your LTV you should have access to the best rates available.
    the difference in rates won't make a massive difference to the total cost.

    Halifax you can switch 3 months early with no ERC what's your current rate?

    Halifax has rubbish retention rates for small mortgages though

    Halifax retention options seem to be

    2y 2.29%
    3y 2.44%
    5y 2.59%

    To pay this off over 7 years rate,payment total interest
    34,900 0.00% 415.48 0.
    34,900 2.29% 450.06 2905
    34,900 2.44% 452.39 3100
    34,900 2.59% 454.72 3297

    To pay this off over 5 years rate,payment total interest
    34,900 0.00% 581.67 0.
    34,900 2.29% 616.16 2070
    34,900 2.44% 618.46 2208
    34,900 2.59% 620.77 2346

    lower rate and overpaying will reduce the cost
    a decent rate seems to b around 1.8% over 5y you have
    34,900 1.80% 608.67 1620

    saving around 700 over the Halifax option.

    overpaying say to 650pm saves 100ish over 5y

    34,900 2.59% 650 2234
    34,900 1.80% 650 1513

    there are other options to reduce the cost like using a 0% purchase CC with no fees and managing cashflow.

    With End of life small mortgage the simple option may be to find a good 5y rate and overpay as much as you can within ERC limits will get much of the savings.

    eg. the Halifax 5y retention over 7 years will cost 3297 that's the max you could save
    pay over over 5 years you are down to 2346

    get a better rate and pay over 5y down to 1620.

    With a bit of effort you could squeeze that lower.
    Last edited by getmore4less; 12-02-2018 at 12:26 PM.
    • mumofthetwins
    • By mumofthetwins 12th Feb 18, 11:38 AM
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    mumofthetwins
    • #8
    • 12th Feb 18, 11:38 AM
    • #8
    • 12th Feb 18, 11:38 AM
    Thanks a million guys .. I have just checked and the 5 yr rate is 2.59% (I think I would be better sticking with Halifax as there would be no charges ?) I was thinking of setting up a dd to overpay 200 extra per month as this would be within the ERC. then im guessing next year I will see what my ERC threshold would be but hopefully keep up the 200.
    I have used the snowball calculator with these numbers and it should be paid of by the end of the 5 year term .. just in time for the boys going to uni lol
    at present I have 7 years 3 months left (payment date 1st) and was thinking of applying asap, I have a bank appointment for 2nd march but was thinking of cancelling this and just doing online .. any advice regarding which would be better and when I should be able to swap (not sure if I would have to wait until 1st ?


    Lisa x
    DFW
    May 2585/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
    • mumofthetwins
    • By mumofthetwins 12th Feb 18, 11:41 AM
    • 1,019 Posts
    • 4,007 Thanks
    mumofthetwins
    • #9
    • 12th Feb 18, 11:41 AM
    • #9
    • 12th Feb 18, 11:41 AM
    oh just thought as well .. I have a holiday booked for me and the boys and I have to pay in $ .. I was going to use my clarity credit card as it avoids fees but im not sure if this would im pact on my application ? I have only ever used it when paying to avoid overseas fees and it has always been paid back in full .. but it would be a balance of around 850 .. I will pay it off at the end of the month but not sure if I apply before then it waould cause any problems ?


    Lisa x
    DFW
    May 2585/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
    • getmore4less
    • By getmore4less 12th Feb 18, 12:28 PM
    • 32,037 Posts
    • 19,225 Thanks
    getmore4less
    Retention deals don't normally have checks.
    • enthusiasticsaver
    • By enthusiasticsaver 12th Feb 18, 1:09 PM
    • 6,412 Posts
    • 13,197 Thanks
    enthusiasticsaver
    I would stick with the Halifax and do the overpayments so long as you stick within the 10% overpayment limit. Don't forget as the mortgage balance decreases so will the 10% so you may find in years 4 and 5 you will have to adjust the overpayment down. Don't worry about using your clarity card. It won't affect your application. Not sure if Halifax will even check as you not moving lenders.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • dimbo61
    • By dimbo61 12th Feb 18, 2:35 PM
    • 9,880 Posts
    • 5,315 Thanks
    dimbo61
    If you do have any spare money then set up a regular saver which should pay over 2%.
    As mortgage rates go up so will saving rates !
    • mumofthetwins
    • By mumofthetwins 12th Feb 18, 6:24 PM
    • 1,019 Posts
    • 4,007 Thanks
    mumofthetwins
    Thanks for the advice guys... I think. I am going to stick with the 5 years and op. I thinl as it's hopefully going to be straight forward I might just do it online.. Not sure when I will be able. To. Apply though
    Lisa x
    DFW
    May 2585/23042
    April 1266.27/25843.54 STF 1500/1500
    NSD 7/15
    MFW OP 2018 400
    GC MAY 78.84/250 April 149.35/250
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