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Jesusaves

9 Years At 6.18 Or 3 Years At 4.84 %

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Currently on 6.18% fixed 9 years.

Taken option of 4.84% for 3 years - cost £99.00

Early redemption charge £5K

Paying £2300 / month and will keep payments same if go to lower rate.

Term 14 years.

What would you do? Stay 6.18 or move to 4.84?

or take variable at 3.78%

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Currently on 6.18% fixed 9 years.

Taken option of 4.84% for 3 years - cost £99.00

Early redemption charge £5K

Paying £2300 / month and will keep payments same if go to lower rate.

Term 14 years.

What would you do? Stay 6.18 or move to 4.84?

or take variable at 3.78%

Question is is it worth moving to 4.84% for 3years if it costs you £5k to do it?

What's the balance on the mortgage?

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Hi,

Outstanding balance 236K

I reckon that the difference between 6.18% and 4.84% is worth £3,162.40 a year in interest.

Over the 3 years therefore you will save yourself £9,487.20 for an initial outlay of £5,099.

I believe that this is worth doing IF you believe that at the end of the 3yr term you will be able to get a mortgage with a better rate than 6.49% for the next 6 years, since a rate of 6.49% (versus 6.18% which you are on now) would cost you an additional £4,389.60 over the 6 years after the 3 year term.

(4,389 is the additional saving over the 5,099 outlay that you make by switching).

I would say depending on your equity position you might well be able to get a better rate than 6.49% over the rest of the life of the mortgage so my personal opinion is that if you have at least 20% equity you would be better off switching.

It's actually a bit better than that, since if you keep the payments the same you will pay off that additional 4,389 and the loan will be smaller at the end of the first 3 years. I have assumed the loan is interest only which is not the case.

What do others think?

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I reckon that the difference between 6.18% and 4.84% is worth £3,162.40 a year in interest.

Over the 3 years therefore you will save yourself £9,487.20 for an initial outlay of £5,099.

I believe that this is worth doing IF you believe that at the end of the 3yr term you will be able to get a mortgage with a better rate than 6.49% for the next 6 years, since a rate of 6.49% (versus 6.18% which you are on now) would cost you an additional £4,389.60 over the 6 years after the 3 year term.

(4,389 is the additional saving over the 5,099 outlay that you make by switching).

I would say depending on your equity position you might well be able to get a better rate than 6.49% over the rest of the life of the mortgage so my personal opinion is that if you have at least 20% equity you would be better off switching.

It's actually a bit better than that, since if you keep the payments the same you will pay off that additional 4,389 and the loan will be smaller at the end of the first 3 years. I have assumed the loan is interest only which is not the case.

What do others think?

Thanks for this. Very clear and concise.

I have about 300K equity - 54%

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I reckon that the difference between 6.18% and 4.84% is worth £3,162.40 a year in interest.

Over the 3 years therefore you will save yourself £9,487.20 for an initial outlay of £5,099.

I believe that this is worth doing IF you believe that at the end of the 3yr term you will be able to get a mortgage with a better rate than 6.49% for the next 6 years, since a rate of 6.49% (versus 6.18% which you are on now) would cost you an additional £4,389.60 over the 6 years after the 3 year term.

(4,389 is the additional saving over the 5,099 outlay that you make by switching).

I would say depending on your equity position you might well be able to get a better rate than 6.49% over the rest of the life of the mortgage so my personal opinion is that if you have at least 20% equity you would be better off switching.

It's actually a bit better than that, since if you keep the payments the same you will pay off that additional 4,389 and the loan will be smaller at the end of the first 3 years. I have assumed the loan is interest only which is not the case.

What do others think?

It may be worth staying put.

£2300 x 12 is £27600 also as its payed monthly the amount of interest will be about £400 a year less so I will knock it off.

Year 1 £236.000 + 6.18% = £250,585 - £27,600 payments and reduce £400 is £222,585

Year 2 £222,585 + 6.18% = £236,341 - £28,000 again is £208,341

Year 3 £208,341 + 6.18% = £221,121 - £28,000 = £193,321

Year 1 £241,100 + 4.84% = £252,276 - £28,000 = £224,769

Year 2 £224,769 + 4.84% = £235,564 - £28,000 = £207,648

Year 3 £207,648 + 4.84% = £217,698 - £28,000 = £189,698

I was curious myself regarding the compound effect and such also my numbers indicate changing wont start paying off until near the end of year 2 so is about 4k benifit worth risking the next 6 years fixed guarentee you have?

I havnt a clue how interest rates will pan out over the next several years but could you get burnt?

The government is printing £175bn this year and the annual defict is about the same and the government has forcast massive deficit spending over several years so if the government keeps printing to manipulate the guilt market yields low at some point I would assume a run on the pound will take place aloso if the deficit spending is financed by the bond market what would the market pay for gilts I dont know but yields may need to be much higher for forien investors to buy them hence high mortgage rates.

Interest rates may stay low or go even lower hence next year you may get a better deal and the thing you are giving up is a year shorter.

Its a tempter but it carries risk when you go to the current mortgage rate offers in 3 years I think for 4k it may be worth staying put for safty and future better offers I hope this info helps.

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