Would you take out a credit card to leave mortgage early?

[LaraWearsZara]

2 options...

1. Take out a credit card to pay our £5k early repayment charge and fix at a new rate of 4.1% which will increase our mortgage by £320 a month or

1. Do nothing and pray to God that in October 2023 when our fixed rate of 1.3% ends we won't be unable to afford our house

YABU - Do nothing and sit tight
YANBU - Take the credit card and jump ship now

Barely slept last night.... we are not bad earners as in £70k between us, but we seem to have so many outgoings my head is in a total spin.

I feel for everyone in the same boat right now.

Speak to a mortgage advisor and see about switching early. You may be able to roll the early repayment charges into the new deal and not have to bother with a credit card.

My fix ends in January and I am going to move early as interest rates are going to go up again in November and then carry on going up for the foreseeable future.
You need expert advice though.

So leaving early will cost you £5k (is that a 0% card?) and an extra £320 a month up to when your rate expires so £3840.

Call it £9k for simplicity.

If you want to say what your current mortgage rate and amount are I could do some scenarios for various interest rates but it feels to me that £9k is too much when currently the rates aren't expected to go too much higher than your new fixed and shouldn't stick around for years.

But it dies depend on whether you can manage if you get it wrong.

Have you calculated how much it will cost you to jump early in terms of fees, cc costs, increased payments v how much you think your mortgage payments will be once the fix ends.
Even if the difference between the rate you can fix at now and your payments in Nov 23 onwards is £1000 pm. It would be mid 2024 before you would recoup the cost of changing
£5000 ERC
£320 x 12 = £3840

You need to be really logical and crunch the numbers. Could you save some of that money to provide a buffer against higher mortgage costs or overpay to get into a lower LTV bracket?

We have had the same conversation except our fixed rate finishes June 2023, any new rates are again £350 more than what we pay.

@DoodlePug can I ask if you work within the mortgage industry? After reading your quote it made me wonder if you know anyone who can help? I tried to speak to a mortgage advisor but they weren't very helpful, just said we can get ready for an application but can't apply until December which left me worried given the predicted increase in November to mortgage rates.

With a rate of 1.3% and a £7k ERC to be honest, I'd sit tight and cross my fingers until the end of the current fix, because rates will have to go up a lot and stay up to be worth paying the £7k and more interest straight away.

I'd also have a good review of my finances and spending to see if I can make things a bit more comfortable.

How much is your mortgage and what has changed since you took it out if you feel like you're struggling, other than increases in food and fuel etc, which shouldn't be stretching you that much unless it's on top of other issues like an increase in childcare costs, debt or similar.

Do you have enough money or are you overspending/leaking money somewhere that could be rained in?

Have a look at Moneysaving Expert and see what changes you could make to free up more money to make things feel easier and possibly build some savings to give you a bit of a cushion.

www.moneysavingexpert.com/family/money-help/

But if you do decide to swap, you don't need to put the fee on a credit card, you just roll it up into the new mortgage and then overpay to reduce the interest it costs.

Taking out a credit card when you're trying to get a new mortgage isn't necessarily a good thing, as it will make it look like you're not on top of your finances.

you teally need to sit down with a spreadsheet and calculate costs of all options.

wrf early repayment charge check carefully the conditions, some have a slinging scale reducing towards the end of the term making it a lot cheaper.
often you can fix with the same provider 6 months before end of term.

From what I’ve read, it’s not possible to add ERC charges to your mortgage? That’s with Nationwide, DD was looking to do a product transfer and the ERC was £1800 but it’s moot now because they put the rates up last night so a 10 year fix is now 5.2% from 3.99% , which is too much of a gamble. She currently pays 3.75%.

well, doing this will, guaranteed, cost you £9k (ish). the question is whether you will recouple that in lower payments going forward. You need to work out how much you will save with a new rate today vs what you think the rates will be (which will be a, hopefully, educated guess) and see if that's £9k.

Without knowing the numbers, I feeling is it will probably not be not worth it.

Please don’t take on more debt.

Can you over pay your current mortgage by even a small amount e.g. £10 a month? My advice to anyone is to use any extra money to increase repayments. This is used to reduce the capital on which the interest is charged. If you get a pay rise increase mortgage payments by 50% of the net increase. Yes, even if it’s only £5 or £10 a month, it makes a difference even if you have a huge mortgage.

Thanks all.
Here's the figures

32 years left (DH is 37 so not sure we can extend our term)
We owe £204,500
Current rate 1.3%
Fix ends next Oct, 2023
Current mortgage is £658 p/m, we over pay it to £750
Been quoted £980 a month on new rate of 4.1% ish
Cannot add ERC onto mortgage, only the new arrangement fee

Any advice will be GREATLY appreciated

Also we have been stupid with money I would say.
We have a car on finance which we pay £360 a month for
Sofas on finance (interest free) which we pay £60 a month for
Kids do 3 clubs each a week totalling around £190
We both wear contact lenses costing around £70 a month in total
Private dental care for the family £50 a month
Window cleaner £18 a month
The list goes on.
We could cut back some areas but trapped with what we have on finance, it was never an issue at all before as we could afford it all but worrying now with EVERYTHING going up if our mortgage goes up too we will be screwed

Unless you have a very specialist prescription, your contact lenses are very expensive. DPs cost £15 pm from Specsavers so it's likely you could cut the £70 significantly.

I suspect your mobiles are more than they need to be too, possibly also broadband? How much a month do you spend on groceries? I bet if you really went through your spending, you could free up a decent amount of money to make things a bit more manageable without seeing a significant drop in your living standards.

When does the car finance end and what's your plan for a car after that?

Both of us have an astigmatism and my prescription is quite bad (-7.5) so mine are nearly £45 a month and dh is £25. We did look into buying online which was cheaper by around £10 a month but then we will lose our free eye tests, half price glasses etc.
Food we pay around £100 a week so not too bad for 4 of us.
Fuel is £40 a week
Mobiles £60 between the 2 of us, broadband £24
We do pay £20 a month in total for Netflix and disney on top of this though
Car we only took out last December, it's 5 year finance and then balloon payment of £12k at the end of the term. If I'm honest we have always just got a new car every few years amd essentially kind of leased them, but this is the most expensive car we've had by a mile. I don't think we will be in enough equity to "hand it back" as such for at least another year and a half.
The plan had been once half way through finance term, chop in for a new car before MOT etc starts.
We used to be really unlucky with cars, eg buying one costing £7k then spending a fortune on mots, services, breakdowns and since this we just got in a habit of getting nearly new and keeping them whilst within warranty periods with no fear of car troubles.
Probably a silly move as now we can't afford to buy a car outright.

What is your LTV?

How long is your new 4.1% fix?

@LaraWearsZara Do not take out more debt.

Q if you change your mortgage now how will you fund a) the increase in mortgage from £750 and 980? b) the repayments on the new loan you are proposing.

If the interest rates on the sofa are higher than 1.3% and there are no early penalty fees etc. reduce mortgage payments to £680 and use the £70 to pay of the sofa.

63%

2 years :(

Sorry no, 5 years. And no arrangement fee

The sofa is interest free thank god, so we wo t be affected by this. It will be paid off at the end of 2024

Sit tight. If you can afford £400 extra a month which is what it would be if you did that, overpay your existing mortgage at the cheaper rate for a year. You’ll end up with £5000 less debt roughly, you will also be under the 60% thst gives better mortgage rates. I know people are panicking but the current state of fluidity is not the time to make huge decisions and owe more capital effectively for nothing.

Don’t over pay anything that’s interest free especially for the whole term like the sofa

Basically OP (and on very rough math) if your new 4.1% is fixed for 5 years, you would in the remaining 3.5 years have to be 300 a month better off on 4.1 than you would be on the alternative to make up for the loss. As you owe 200kish, that would mean an interst rate of 7% or higher.