Mortgage question

[OneDetectorist]

If your mortgage company has an early repayment penalty of 1% and you have 10 years left on your term, and £25,000 remaining mortgage to pay, does that mean it'll lost £250 to repay it in one lump sum?

Usually, the early repayment penalty is only until the fixed % rate ends. Is yours fixed for 10 years?

If that is your current penalty yes. Although some providers charge a small discharge fee too so you'd be best checking with them.

It's a tracker, with 3 years left fixed.

I'm thinking it'll be cheaper to pay the 1% penalty now, if it is only £250, than to pay a further 3 years of 3.5% (repayment)?

Depends. Are you paying it all off?

Paying the early redemption fee is only worth it if you are paying the whole thing off, or switching to a better rate that is cheaper (over the new rate term) than the ERF.

A fixed tracker sounds unusual.

Do you mean it's a fixed percentage above the base rate for the tracker period?

Or the interest rate is fixed for the next 3 years then tracks the BOE or bank's own base rate after that?

But if the repayment penalty is 1% and you can pay it off, it could be worth doing, but you might also want to put money in savings and self offset some or all of it rather than paying it all off, as you can get more than 3.5% interest on savings now (although the base rate is expected to rise again later this week, which could change it).

In any case, MSE has a 'pay off or save' calculator, that can be used to compare, but first double check what product you're actually on.

Yes it'd be the whole amount

Can you pay it all off except for, say, £100 to avoid an early redemption penalty.

We have a tracker mortgage with a borrow back facility. We paid it all off except for £89 about 8 years ago (we have 5 years left). We were paying 4p a month in mortgage payments, it is now 20p a month with the interest rate rises. But this is cheaper than the £250 ER payment and gives us the opportunity to borrow back at a cheap rate (0.25% above base rate) at any point.

Basically I need just £25k mortgage to buy the next house, I can pay this off next year though.

So looking for the cheapest way to borrow it and then pay it back!

I've seen a 3.5% tracker (fixed for 3 years at 3.5%) with a 1% early penalty.

Plan would be to pay the monthly mortgage cost for 6-10 months, then pay it back in a lump sum.

Really appreciate the help thank you!!

You need to speak with a broker. There are some tracker rates available with no early repayment charge currently (according to my colleagues who are mortgage brokers)