A mortgage question

[Batmanandrabbit]

I would like some help please to un-muddle my brain….

We are moving to a different fixed rate mortgage with a new lender. For cashflow purposes (and to stop us obsessing about potential rate rises) we will pay the early repayment charge to our existing lender and just get it done and forget about it for a while.

It will mean a higher monthly payment than we currently have on our existing fixed rate. I have made my peace with that decision because I want as much predictability in my finances as possible given the current climate.

The mortgage offer for the new rate is available until Feb 2023. We have completed most of the paperwork and have been asked what completion date we would like.I am thinking of asking for end of December which would give us a few more months on our current (fixed - lower rate) while still keeping access to the new rate we have chosen with the new lender.

The solicitor seems unphased by this and our mortgage broker says we can pick whatever date we like. Am I missing any obvious reasons why we shouldn’t delay the completion date and enjoy a bit more time on the lower rate?

I hope that all made sense 😂

Seems to make sense to me. Will longer on the lower rate give you less of an early repayment charge too?

@LadyDanburysHat thanks for the reply. Yes I did wonder whether the ERC would be less as it’s a % of the remaining balance which would be a little lower by the end of the year.

I was wondering why you don't just leave it until January or February, get as long out of it as you can. You could also potentially overpay at the new amount, if your mortgage allows. This would come off the balance and your remortgage amount would be less then.

I think you are right. I will have another word with the solicitor to see how much paperwork is left to do and how long the completion process will take. I want to leave a little wriggle room so that we don’t inadvertently miss the offer expiry date and end up on a higher fixed rate.

I like the idea of over paying on the existing mortgage and bringing down the ERC that way too (as well as having a lower balance to pay off….).

Thanks for your time!

yes make the completion date as late as you can within the timeframe you’ve got if you’ve already paid the arrangement fee.

Unfortunately the ERC isn’t based on your remaining balance, it’s based on what the loan amount was when you took out your current deal.

i only know this because I’ve looked into it this year as well.

@MissPoldark that’s interesting about the ERC amount. I suppose it makes sense from the bank’s perspective!

We had planned to add the arrangement fee to the mortgage.

It sounds like the consensus is to hold off for as longs as possible before paying them a higher monthly amount…

Most ERCs are based on the outstanding amount - best check with your lender

I vote delay as long as possible. Remortgages are relatively straight forward unless you’re making any other changes at same time, like changing names on mortgage or paying off secured debts. There should be no issues delaying to just before end of February 2023. I agree with others and check with your provider, my erc was a percentage of the final balance.

just checked T&Cs of our lender which is one of the main high street banks - the ERC is definitely calculated using the original loan amount.

apologies, just assumed that must be pretty standard with the bank being one of the top mortgage providers (even though before I looked into changing our mortgage in detail I was actually expecting the ERC to be based on the outstanding balance)

I will double check our small print on the ERC issue! I’ll be a mortgage expert by the time this is over 😂

I am pleased that we can save a few ££ for a few more months while still having the security of a new deal to jump on to.