Soldato
A bank loan surely wonts be cheaper.
Mortgage Rate Rises
- Thread starter glenimp617
- Start date
Soldato
If the rate is about the same there won't be much in it either way, except a loan is just one time organization and then all finalised by the end.
Soldato
You and @purplesky would love each others company... Unless that's just a company of 1 of course i.e. possible duplicate account?
Soldato
My KFI documents have similar wording for ERC with partial payments etc, but they also call out how Overpayments work in tandem with this (pay max of 10% of initial balance yearly, without incurring ERC).
Your documents should also call out how overpayments work even if it's n/a like I had with my tracker some years ago.
Soldato
Go on, enlighten all us morons as to what could go wrong on paying off a mortgage of £8k with a bank loan at circa 4.5% if interest rates, by your own assumption, are going to 6%?
It was already mentioned here that the lowest loan rate was 4.8%, so just slightly higher than the mortgage. I was initially hoping the loan rates may have been lower.
By taking the bank loan option saves me from more mortgage rises, but a gamble if rates drop.
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If your lender would accept a credit card payment to clear whats outstanding, then putting some or all on a 0% CC would be the most sensible option. I appreciate this is unlikely but worth mentioning.
That's interesting, never thought of that - 0% would be better!
At least give him chance to confer with his team and get back to you.
If the bank loan is lower. Use bank loan. Simple as that really (barring any limits or conditions on mortgage)
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Don't even have to do that.
Just get a 0pc purchases card. Spend all your usual spending (food, subscriptions, holidays etc) and on it and just use any other income to overpay the mortgage.
Might take a while. Depending on spending habits but no harm in it. Some credit card limits are plenty high enough. One of my cards alone has a 10k limit.
Soldato
Looking to remortgage for the final time today since my normal payment was taken off. Start going through the online system and it comes to reducing my term time to 2yrs (current payoff date is 3yrs exactly) but it says I can't reduce my term below 2yrs and 6 months without having to go through affordability checks. They think I'll struggle with 313quid while I've just made my last payment of 483 and where I've been consistently overpaying most months for the last 5 or 6 years 
Soldato
- Joined
- 16 Aug 2009
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Option 2 was my bank's default as well, which for an interest only mortgage doesn't make much sense so I told them to change it to option 1, paid off the bulk of the mortgage and payments have reduced by £300 a month thats money that can definitely be better spent elsewhere and gives me a chance to save something if I can put aside 4k a year for the next 4 years thats the mortgage paid off early
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Soldato
If you pay off you interest only mortgage earlier do you have to sell/settle earlier?
Or do you get rest of the term time free?
I'm just looking at rates as a first time buyer for a 95% mortgage. I'm pretty confused about what to expect, some comparison sites are starting at ~5.1%, but then money supermarket has some starting from 4.15% which is a "lifetime discount" type. There are a bunch more "discount" ones from 4.19% to 4.74%. The first "fixed" is 4.75%.
Does this sound about right? It's better than I was expecting to be honest.
Does this sound about right? It's better than I was expecting to be honest.
This intrigued me so I put some numbers in to a spreadsheet, keeps the grey matter ticking....
For a 0% cash transfer of £5k from a credit card with a fee of 3.1% that's £155 in what is technically still interest. The balance of the CC account is then £5,155, over 17 months that's £303.24 per month for 17 months to clear the balance in time. Remember the fee of £155 is not interest fee and if not cleared in full interest will be charged on all of it.
You'll have to keep paying the minimum of that balance which for some credit cards is 3%. The first 3% payment (£154.65) won't cover the fee so additional payment is required as mentioned before. In this example I'll assume additional payments on top of the minimum 3% will be made anyway, like this:
Assuming a mortgage of £170k over 20 years at 3.5%, so £986.26pm with no additional payments would look like this, our baseline:
Taking the £5k borrowed earlier and putting in to the mortgage, keeping the monthly payments as before, would look like this:
Only an interest saving of £84.18 over the first 17 months because the £155 fee eats in to the saving. There is a substantial saving of £4,747.99 over the full term of the mortgage, plus it would be paid off 10 months early. This assumes that the interest rate stayed the same, never remortgage or altered in any way.
What if instead of taking the credit card cash transfer we increased the mortgage monthly payments to what would have been paid to the cc balance for the same 17 months?
Over the 17 month period there is a saving of £122.40 compared to the baseline which is better than the credit card cash transfer method as there is no fee to pay. A nice saving of £4,819.15 over the full mortgage term and it's 10 months shorter compared to the baseline too.
In summary, making regular mortgage overpayments each month is better than a fee inducing cash transfer from a credit card. It's less risky, you can decide not to overpay should you need to one month or more and you don't have to calculate additional payments should you use the credit card for purchases too.
There are a few ways I could see a cash transfer from a CC being better. Instead of making regular CC payments above the 3% minimum required you put those in to a savings account and pull it at the 17 month mark to clear the balance of the CC. I haven't calculated what interest you'd obtain from such an approach but I reckon the savings account interest would need to be at least 3% or higher to see any benefit, plus it's added hassle and complexity. Another factor for consideration is if you are about to end a low fixed rate and enter a higher rate mortgage then paying something in the present will save in the future, increasing the savings made.
I've tried my best with my numbers and calculations but if you see any errors or omissions please let me know
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Man of Honour
Going shorter not an option or taking a tracker? Not that I necessarily have any strong opinion about whether this would be preferable, it's just I'm super wary of anything but short fixes at the moment.
I had been pondering on trackers for a good few months. But there is no solid ground on what is happening.. I'd expect from what I had read one or two more rises ?. Then an apparently really really slow fall..which may take a couple of years to get to 2.5 or 2.8? Who knows.. trackers with no ERC are also bit more expensive
I'm running out of time to guess the future if I'm honest.my fix term ends in 2 months and I'd be paying £1093 standard variable rate on current lender when my current fix (coming to an end is £612
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If I were you, I'd fix for 2 years. In the short term, rates are going to go up again for sure.