Should I exit my mortgage early?
Discussion
I'm just over a year into a 2 year fix with halifax. 4.79% on £128500. Exit fee is 2% so approx £2500. I can put an extra 3-4k into the mortgage and hopefully achieve a 85% LTV And I assume the house has risen in value from 144000 purchase price agreed in March 2014.
I am seeing offers around 1.8% but these usually have high fees which negate the savings. I have found some mortgages which have no fees and would in theory save me £500 over my remaining 11 months once exit fee is taken into account. However it would take a few months for this all to be arranged so in reality it won't be a whole year, and there are no exit fees in the last 90 days of my current mortgage so I may have just answered my own question - wait until then.
Assuming I do wait until next year would it be advisable to look for a 5 year fix instead of 2? I assume rates will start getting higher soon. Or should I take the 2 year fix at what will hopefully still be very low rates in a years time, overpay it like mad with the lower fixed payments, and then take a 5 year fix after that. I want to take advantage of low interest rates while they exist, unfortunately I didn't have the best credit score or much deposit and so got a really poor rate for my first mortgage.
I am seeing offers around 1.8% but these usually have high fees which negate the savings. I have found some mortgages which have no fees and would in theory save me £500 over my remaining 11 months once exit fee is taken into account. However it would take a few months for this all to be arranged so in reality it won't be a whole year, and there are no exit fees in the last 90 days of my current mortgage so I may have just answered my own question - wait until then.
Assuming I do wait until next year would it be advisable to look for a 5 year fix instead of 2? I assume rates will start getting higher soon. Or should I take the 2 year fix at what will hopefully still be very low rates in a years time, overpay it like mad with the lower fixed payments, and then take a 5 year fix after that. I want to take advantage of low interest rates while they exist, unfortunately I didn't have the best credit score or much deposit and so got a really poor rate for my first mortgage.
I wouldn't.
I'd overpay the absolute maximum that you are allowed to without penalty, to reduce how much interest you are currently being charged and save any surplus you have, ready for when you change over and can overpay without limitations.
Paying a £2500 ERC to get a lower rate is the same as what you said about low rates with high fees; it negates the saving.....plus the property may not return the increased valuation figure you think it might given that it wasn't bought that long ago....
I'd overpay the absolute maximum that you are allowed to without penalty, to reduce how much interest you are currently being charged and save any surplus you have, ready for when you change over and can overpay without limitations.
Paying a £2500 ERC to get a lower rate is the same as what you said about low rates with high fees; it negates the saving.....plus the property may not return the increased valuation figure you think it might given that it wasn't bought that long ago....
Alrey87 said:
I'm just over a year into a 2 year fix with halifax. 4.79% on £128500. Exit fee is 2% so approx £2500. I can put an extra 3-4k into the mortgage and hopefully achieve a 85% LTV And I assume the house has risen in value from 144000 purchase price agreed in March 2014.
Most lenders allow up to 10% of the outstanding amount without penalty. I believe Halifax also recalculate the monthly payment immediately after receiving an over payment.Sarnie said:
I wouldn't.
I'd overpay the absolute maximum that you are allowed to without penalty
I'd overpay the absolute maximum that you are allowed to without penalty
Ideally you'd need the outstanding loan amount to be around £122,000 or less. You can check the house price index on the Land Registry site http://landregistry.data.gov.uk/app/hpi/ to get an idea of price movements in your area as that will also help you achieve your target LTV.
According to that website it should be worth just over 150k which means I'm almost at 86% without putting any money in. But I'm not sure if that's a reliable estimate. That's part of the reason I'm not rushing to overpay now as the price rise might take care of the LTV for me. But if I wanted to swap now I have a few thousand spare that I could use to make up the difference. If I overpay 2k without remortgaging all I really save is 4.79% of 2k over a year which is just under £100. But that's quite a lot of money to in effect not have available in order to save a hundred quid.
Alrey87 said:
According to that website it should be worth just over 150k which means I'm almost at 86% without putting any money in. But I'm not sure if that's a reliable estimate. That's part of the reason I'm not rushing to overpay now as the price rise might take care of the LTV for me. But if I wanted to swap now I have a few thousand spare that I could use to make up the difference. If I overpay 2k without remortgaging all I really save is 4.79% of 2k over a year which is just under £100. But that's quite a lot of money to in effect not have available in order to save a hundred quid.
Lenders surveyors will revert to sold property prices in your postcode NOT a HPI.If you have disposeable surplus income and a debt at 4.79%, overpay it heavily.........do not rely on property appreciation to hit your LTV. If you do both you might even hit 80% and access even lower rates............
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