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Can someone just check this isn't a stupid idea?

(6 Posts)
AntoinetteCosway Tue 11-Mar-14 10:10:28

Current mortgage: 4.79% fix ends in May and reverts to APR of 3.94%. 30 year original term, 28 years left. Payments currently approx £650, will go down to approx £550. We have made max overpayments allowed since the beginning, so have actually been paying approx £740. OPs will no longer be restricted once the fix ends.

Have found a new 15 year mortgage for when the fix ends (no exit or other fees but booking and valuation fees for new mortgage will be approx £600). 2 year fix at 3.49%. Payments will be approx £790 and overpayments are unlimited.

After paying the fees we will only actually save about £800 over the two years, BUT we will be slashing the remaining term from 28 years to 15 years and keeping the payments we make roughly the same, having the security of another fix and still be allowed to make overpayments.

Despite not saving much actual cash in the short term, this is a sensible move, right? I feel like it is but I'm scared to change the status quo! Our other option would be to stay on the current mortgage's APR but keep our payments at the higher rate so we're making bigger overpayments each month. I'm nervous that the APR will jump when interest rates go up though and then our 'over'payments will just be swallowed and become part of our regular payments. I also hate the albatross of 28 bloody years around our necks.

We can't find a better deal than the 3.49% as our LTV is about 82%.

Any thoughts or do we need to just stop overthinking it and do it?

Rockchick1984 Tue 11-Mar-14 10:24:27

Why not look at a longer fixed rate - means it'll be longer until you need to pay arrangement fees again, and if interest rates are higher in 2 years then you will be very glad you did! Rates will be slightly higher for a longer fixed rate of course...

AntoinetteCosway Tue 11-Mar-14 10:32:23

That is true but we're hoping to pay off enough in the next two years (overpayments that is) to get into a better LTV band, so don't want to be fixed for two long iyswim. Though I wish I had a crystal ball because if rates rise a lot then I suppose having a better LTV might not make much of a difference!

AntoinetteCosway Tue 11-Mar-14 10:32:46

TOO long.

Rockchick1984 Tue 11-Mar-14 10:40:29

You tend to get slightly better rates at 80% LTV, significantly better at 75%. Can you (or mortgage adviser) calculate how much extra you would need to repay over the 2 years and see if it will be realistic?

AntoinetteCosway Tue 11-Mar-14 11:05:05

Ok, so my spreadsheet says it is possible to get below 75% in the next two years. That's good!

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