Author Topic: Mortgage question (UK but maybe anyone can help)  (Read 622 times)

twojabs

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Mortgage question (UK but maybe anyone can help)
« on: December 29, 2016, 03:55:23 PM »
Hi

I have a mortgage and a deal period is ending soon so my lower rate is scheduled to jump from 1.49% to a standard rate of 3.74% for the remainder of the term (26 years).

I currently have approximately 52k outstanding on this mortgage.  All the options below allow for overpayments, but the fixed ones only allow for "Early Repayment Charge applies for overpayments over 10% of initial balance or if you exit your deal early".  This means I am allowed to make overpayments of up to 10% per year of the original mortgage loan amount (10% * 52k = 5,200). Any overpayments over the 10% allowance will be charged an ERC (2% in yr 1, 1% in yr 2) on the amount above the allowance, not the total overpayment. The year begins on the anniversary your mortgage started. (this is around 430/month, i currently overpay around 40/month)

There are a few options:

2 yr Fixed   @ 1.24% : arrangement fee 999
            
2 yr Fixed   @ 1.64% : arrangement fee None
            
3 yr Fixed   @ 1.54% : arrangement fee 999
            
3 yr Fixed   @ 1.84% : arrangement fee None
            
2 yr Tracker @ 1.14% (currently) : arrangement fee 999
   Bank of England Base rate +0.89%
      
2 yr Tracker @ 1.54% : arrangement fee None
   Bank of England Base rate +1.29%   

I can have the arrangement fee added to the mortgage to pay down over time, but this doesn't feel..... right.      

My initial reaction is to go with either the 2 yr fixed @ 1.64% (with ERC) or the 2yr tracker @1.54% (no ERC) ; and hope the Bank of England base rate doesn't rise.  I'm leaning more towards the 2 yr fixed @ 1.64% as this would be a "happy" medium between the 1.54% and a potential 0.25% BoE interest rate rise.

I do not expect to make overpayments over the approximate 430/month as i am currently investing that in some diversified trackers (i figure i can "get this money back" in an emergency however if it is in the mortgage it is "gone").

My head is burst.... any advice or thoughts would be welcome on my logic.

JrDoctor

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Re: Mortgage question (UK but maybe anyone can help)
« Reply #1 on: December 30, 2016, 08:52:18 AM »
I think the total owed is not huge (even assuming you are a minimum wage earner).  None of those choices seem wrong, however whichever of the 3 yr fixed rate ones is cheapest would be my choice, 1.84% is a tiny cost, that's under 1k a year of interest.  How much do you earn if you don't mind me asking?

twojabs

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Re: Mortgage question (UK but maybe anyone can help)
« Reply #2 on: December 30, 2016, 03:12:52 PM »
Thanks for coming back to me @JrDoctor.

I think i've worked out if i take the 3 yr fixed @ 1.84%, i'd spend 195 more after 3 years than the 2 yr tracker @ 1.64% (assuming no changes of BoE rate, and i can achieve the same rate for a third year.  after the 2nd year, i'd be 125 more paid n the fixed rate than the tracker... maybe the 3 yr fix would be a good thing........

I earn around 35k/year, but my wife earns living wage part time (bring in around 300/month part time).  She's about to go on maternity leave for 9 months at statutory (140/week?), plus an extra 50/month child benefit.

Agree the amount isnt huge.  This is only "mortgage 1", we have a 2nd mortgage fr our old flat (unwilling landlords at the time but maybe a good thing for the long term). total outstanding 135k over 26yrs.