Hi, quick question. If I took a 5 year fixed rate mortgage, and it was paid up 1 year early (with an early repayment charge of 2% in year 5) what is the fee that is based upon? If I had £25k remaining going into the final 5 years, is it based on that? Or based on your final payment, say around £500? Or something completely different altogether?
Sorry, also is it possible to take out a 5 year mortgage if your intention is to pay it up in 4 years, via overpayments? In know this would incur an ERC.
If you have 25k left, and had overpayment allowances of 10% then you’d be able to over by £2500. Anything you overpay above that amount (so not counting your regular payments) would be charged at the 2% fee.
It’s possible, yes, you would just had to pay the fee stipulated in the contract. Obviously, make sure overpayments are allowed if that is your plan. Would you not be better getting a 3 year fix though and just paying the remaining amount off in year 4 when the fixed period has ended? You’d have 1 year on a tracker but it’d on a smaller amount and you could pay it off whenever you felt like it, fee free. You’d also get a better rate at 3 years most likely.
I think at the minute a 3 year would be a higher rate in expectation of rates dropping over the coming years
Wow isn't it great to have good intelligent, knowledgeable people on this forum, it amazes me what vast range of advice we can get . Power to the pen.
Thanks JD. My provider on;y has 2 and 5 year fixes, and i've only done 5 year fixes so far and would like to finish in around 4 years. But I wondered if a 5 year fix could be paid in around 4 years based on monthly overpayments. My provider allows unlimited recurring overpayments, but one-off payments incur a percentage penalty. Paying off a monthly amount as overpayment gives me the security that if my circumstances change, then I can reduce or cancel the overpayment altogether if required. But the intention would be to pay off in 4 years. Thanks for the info
I’m doing the same thing but with a ten year mortgage (or I was until savings accounts interest went higher than my mortgage so now it’s going into a fixed account instead). We can only overpay 10% though. I’d type in your planned payments into an Excel spreadsheet and compare how much it would cost doing a five year deal at their current rates and how much it would cost doing two two year deals. I know you can’t guarantee what the rate will be in two years but it’s unlikely to be higher than what it would be today based on Bank of England predictions. Obviously, there’s any set up fees to consider too. If there’s no reason why it has to be four years then I’d probably just take the five and let it run its term rather than paying a fee. Again, use Excel to see how much it would cost to run it for the five compared to paying it early on four but being hit with a fee.
It sure does, and he has helped in the past, very helpful guy. But I think I've got the answers that I need. Thanks all.
Don't need to overcomplicate it, you can overpay by the stipulated amount detailed in the mortgage offer without penalty, don't believe that the term would matter on this. It's usually 10% for a 5-year fix but depends on lender, some allow 20% now, some none without paying an ERC. Best thing to do is check the mortgage illustration/offer or give the lender a call to check.
