So, I sold my house last month and paid an early repayment charge of about £2000. Moved into rental, now in the process of buying new house so need a new mortgage.
The old mortgage was about £133k outstanding with a rate of 1.7%. Now need to borrow £250k and have been offered 1.28%.
The thing is, the lender have said that if I apply for another mortgage with them within 3 months of closing the old one, they will refund the £2k ERC. But the catch is, I'll need to port the old deal, meaning my new mortgage will be split into 2 parts, one of which will be for £133k at 1.7% until next September (when the old fix ended), and the new extra lending part will be fixed at 1.28% for 5 years.
What I calculated was that the extra interest until next September only costs me about £250, so it seems worth it to get the £2k back. But then I have to move that balance onto another fixed rate, or it will default to the variable rate of 3.59%.
So my worry is, what if rates go up by next September? If the best rate I can move the ported mortgage onto is say 1.75% then it's hardly worth doing. If it was 2% then it will end up costing me more in the long run.
The other concern is that I'll be forever stuck with a mortgage in 2 parts with different fixed rate end dates, making it awkward if I ever wanted to switch to another lender.
WWYD? 