Repaying fixed rate mortgage early

[AlfaSpider]

I'm about 3.5 years into a 5 year fixed mortgage with a 25 year term, the interest rate is about 4.5% and remaining ballance of 118k. If I were to repay the full balance now there would be a charge of 2% I believe this is less than the interest I would pay until the fixed term is up in 1.5 years.
If I were to look at obtaining another mortgage in 3-4 years would having repaid my current mortgage early and paying a fee affect getting another? This would be a LTV of about 50%. Thanks for any advice.

[Sarnie]

Paying an ERC isn't in anyway going to affect your ability to obtain another mortgage now or in the future.

You are entitled to redeem the mortgage at any time you wish, there is currently a 2% ERC for doing so, which you are either happy to pay or not......

[AlfaSpider]

Thanks, that was my only concern that I would affect my chances later on. It seems to make sense rather than hanging on if the ERC is less than the interest that would be paid.

[Ozzie Osmond]

AlfaSpider said:

I'm about 3.5 years into a 5 year fixed mortgage with a 25 year term, the interest rate is about 4.5% and remaining ballance of 118k. If I were to repay the full balance now there would be a charge of 2% I believe this is less than the interest I would pay until the fixed term is up in 1.5 years.
If I were to look at obtaining another mortgage in 3-4 years would having repaid my current mortgage early and paying a fee affect getting another? This would be a LTV of about 50%. Thanks for any advice.

What do the sums say?

18 months to go on £118k at 4.5% is £7,965 of interest still to pay (out of taxed income).

2% penalty is calculated on what? On the £118k remaining or the amount of the mortgage when the fix started 3.5 years ago? Anyway, on the £118k a 2% penalty would be £2,360

If these figures are correct I'd definitely pay the penalty and get out, pocketing £5,600 tax free benefit.

[Sarnie]

Ozzie Osmond said:

18 months to go on £118k at 4.5% is £7,965 of interest still to pay (out of taxed income).

This is based on the assumption of a none decreasing balance, which it won't be if he's on a Capital & Interest Repayment mortgage........

[Sarnie]

Ozzie Osmond said:

If these figures are correct I'd definitely pay the penalty and get out, pocketing £5,600 tax free benefit.

Also, there's isn't a £5,600 tax free benefit...........there will be interest to pay on the new mortgage in addition to any product fees (arrangement fees, valuation fees, booking fees, solicitors costs)......the total of which needs to be less than the cost of remaining on the current rate, to make it a worthwhile exercise.....

[brianthemagical]

Is the sort of thing a mortgage broker would help with (the advise and sums to ditch the fix)?

Given the sums involved, even if they are based on the assuption that the next 3.5 years wouldn't incure interest with the new loan, its helped me realie just how small the brokers fee is in comparison to the total cost of a mortgage.

Saying that, my mortgage is still in progress so my opinion may change...

[Sarnie]

brianthemagical said:

its helped me realie just how small the brokers fee is in comparison to the total cost of a mortgage..

I'm sure your Broker would happily accept a higher fee if you insist