paying an early redemption charge

[princeperch]

basically we purchased our flat in July last year, and when we applied for the mortgage in April, I thought rates would be going up.

I got that wrong, so my fault. I fixed, and as we only had a 10 pc deposit ended up paying 5.99% with the COOP.

this might sound nuts but it was actually cheaper than renting and we didnt pay stamp duty (2.5k) and the mortgage had no product fee, (normally 1k), so we saved 3.5k doing it this way, although we are paying a crap rate.

anyway, fast forward nearly a year and we have overpayed quite a bit, more than I thought we would, and are nearly at 20% deposit. That said, whilst we might have overpaid more than I thought we would, I called the market wrong, and take that on the chin.

However, and that said, I cant see the value of keeping this 3 year product (of which we will shortly be 1 year in) if we have improved our position so much, so I'm looking into remortgaging it and paying off the early repayment charge, one year into out 2 year fix.

The early repayment charge will be 2% so that will cost us about 4k to do on the outstanding mortgage balance of 200k, which is a bit of a kick in the nuts but not the end of the world.

having thought about it, if we remortgage to another lender we will have to get it revalued etc etc etc and pay the legals which will probably cost about 2k, so we might as well stay with our current lender for another 2 years if we can, as they wont revalue and will just change the product. They currently do a 2 year fix with a 20% depo, with no product and reservation fee, no valuation required, and it would simply be a case of paying them the 4k ERC (which funnily enough is the exact amount of capital we will have paid off from the boggo monthly repayments so I guess I would simply give that straight back to them!) and the payments go down. whilst I cant apply for this until the summer the bloke said that this product, or one very much like it, will still be available in a few months time.

this would reduce our monthly repayments by £350.00 pcm (which equates to a saving of about 4k over the 2 years left of our current fix after having paid them their blood money, which is very nearly a couple of hundred quid a month).

its a no brainer isnt it? have I misssed anything?

I'm not moaning about the ERC btw I am an adult and made the decision to fix and appreciate that I will now need to pay them to undo what is done.

[scotal]

Co-op don't do an 80% Mortgage, they have either a 75% or an 85%
At 80% they can be beaten on rate, depends how confident you are of the valuation.

[princeperch]

scotal said:

Co-op don't do an 80% Mortgage, they have either a 75% or an 85%
At 80% they can be beaten on rate, depends how confident you are of the valuation.

yeah I should have made that clear. its actually an 85% product but we will have 20pc down.

at 80% they can be beaten on rate, (I could get 997 pcm v's 1091 pcm) but if I did that then I'd have to discharge the current charge and refinance it properly at the land registry etc which would probably cost about 1.5k, so that knocks out any saving!

the valuation with the coop wont rely on any increase in value, they will simply use the valuation when we purchased the place originally..

eta: with the coop i can get a 3.69 tracker for 2 years or a 2 yr fix for 3.99.

would I have large balls if I went for the tracker? It only makes 30 quid a month difference and I think that the fix would help me sleep at night...

Edited by princeperch on Tuesday 28th February 11:13

[scotal]

princeperch said:

at 80% they can be beaten on rate, (I could get 997 pcm v's 1091 pcm) but if I did that then I'd have to discharge the current charge and refinance it properly at the land registry etc which would probably cost about 1.5k, so that knocks out any saving!

It wouldn't cost that. It can be done for nothing, free val, free legals, cashback on completion.

princeperch said:

the valuation with the coop wont rely on any increase in value, they will simply use the valuation when we purchased the place originally..

That's the bit which might be compelling, but get the right mortgage and the free val might give you an option.

[princeperch]

scotal said:

That's the bit which might be compelling, but get the right mortgage and the free val might give you an option.

I'll drop you a line

[scotal]

princeperch said:

would I have large balls if I went for the tracker? It only makes 30 quid a month difference and I think that the fix would help me sleep at night...

You've talked yourself into a fixed rate there. You'll st yourself every time there's an MPC decision due for the foreseeable future. Co-ops lifetime tracker has a 1% lock in until 2015 as well.