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broker just been in touch about our fix which is ending in october (we'll then owe £8000). term officially has 2 years left, however we overpay, and would want to ideally settle it within a year from october.
barclays have given us a sh1t follow on deal, broker has beaten it with a BOE +0.86% deal with no early repayment charge, she says that works out at 5.36%.
however, at £8,000, im thinking we're starting to get into interest free credit card territory. im not tooooo clued up on all things finance, and i believe that theres some sort of fee involved still (3% rings a bell) to transfer money etc, but that would still beat this deal offered.
if not might a personal loan still be cheaper?
whats our best option do you think oh wise ones?
thanks
Firstly congratulations! It must feel pretty awesome to be at the end of the mortgage grind!
With 8k to borrow, I can’t imagine it’s worth the admin costs to most lenders to take you on so you may struggle to find a competitive deal
That being said, what’s the monthly cost difference between the best and the worst deal? Couple of quid? How bad is the follow on deal and is it worth half a day of your life to find something better?
If less than a year it's probably worth just keeping the mortgage. The total interest at that rate will be about £440 over the two years or about £230 if overpaying and clearing within 1 year.
You'd need a credit card that does money transfers as most lenders don't accept payments via credit card. You'd need to money transfer then use that money to pay off the mortgage - a 3% fee would be about £240. So will probably cost about the same in interest as mortgage + overpaying within a year.
That being said, what’s the monthly cost difference between the best and the worst deal? Couple of quid? How bad is the follow on deal and is it worth half a day of your life to find something better?
the follow on deal offered via app is tracker at BOE +3.49%.
broker has found this tracker at BOE +0.86%. ironically, i think thats with barclays too, maybe brokers have more available to them than joe public?
broker doesnt charge any fees (to us anyway), so if you think keep with the mortgage is best option, then it probably makes sense to just let them do their thing no?
thank you
Assuming the new deal doesn't come with any up front fees, I'd let the broker crack on it's what they're there for. Barclays are obviously hoping that people will take the path of least resistance and just tap 'yes' in their app when they see the warning for the end of their current fix.
Also congratulations, what a great position to be in!
Do you have to start a new deal? Won't it just revert to SVR?
Or get an interest-free credit card and max that out on all other purchases you make (other than your mortgage) whilst overpaying the mortgage with the 'spare' money you have, then pay off the card before it starts attracting interest.
broker doesnt charge any fees (to us anyway), so if you think keep with the mortgage is best option, then it probably makes sense to just let them do their thing no?
Broker might not however what's the new lender charging for the fees? On 8k I can't see it costing less than the barclays interest
Do you have to start a new deal? Won’t it just revert to SVR?
doesnt say that no, it says when fix ends, youll be put on that.
Assuming the new deal doesn’t come with any up front fees, I’d let the broker crack on it’s what they’re there for.
thats starting to be my gut feeling now yes.
Or get an interest-free credit card and max that out on all other purchases you make (other than your mortgage) whilst overpaying the mortgage with the ‘spare’ money you have, then pay off the card before it starts attracting interest.
sounds very clever, but more than my poor brain could handle i think 😀
Broker might not however what’s the new lender charging for the fees? On 8k I can’t see it costing less than the barclays interest
she says its a £99 start-up fee, no early repayment, and an £80 final payment.
am i answering my own question here (with your help of course) 😀
thanks
sounds very clever, but more than my poor brain could handle i think
It's pretty easy really (let's assume it's a 24 months interest-free credit card). If you normally spend £800 a month on fuel and food shopping, stick it all on the credit card instead. After 10 months the CC will have a balance of £8,000 and that £8,000 that's still sat in your bank account can pay off the mortgage. Then, as you are no longer paying your mortgage, you'll have 14 months to pay off the CC using the extra cash you'll have each month because you no longer have a mortgage to pay off. (This is very simplistic and I have deliberately not tried to calculate exact amounts, but I hope you get the idea)!
My thoughts are... FWIW. If you pay by credit card, you may have a fee to pay, and could be construed as a 'cash advance' by the CC company? Thereby not getting the 0% rate as well.
Not sure how youd get it onto a 0% balance transfer, when it'd have to come from another CC, or mentioned above, pay a CC with your day to day expenditure to release a pile of cash....
Taking a personal loan would be an expensive way to do it
The only bonus is the above would be unsecured credit, so if you default, your house doesnt get taken away from you.
For ease, and likely a lower rate (if you dont get 0% or with cumulative fees to get 0%), id let the broker crack on. But unlike above, its secured on your house if you dont pony up the payments.
I read somewhere, that rather than paying your mortgage off outright you are 'better protected' if you take out something like an offset mortgage and keep enough money in the savings part to balance out the amount owed on the mortgage (eg. £8000 offset mortgage, put £8000 in the offset savings and pay no interest).
The logic behind this was for a couple of reasons - if you need 'emergency money' - you can take it from the savings at a much lower rate than a short term loan.
But the main reason was that if anything like land registry fraud is attempted, then as the bank still technically owns the house, then they will go after it, provide legal support etc - whereas if you own the house outright, then any big legal fees to reclaim your house are on you.
It's probably worth asking your broker about this, if it's valid advice or not...
broker has found this tracker at BOE +0.86%. ironically, i think thats with barclays too, maybe brokers have more available to them than joe public?
Ring Barclays and ask them.. I know that might be quite a painful process in itself.
however we overpay, and would want to ideally settle it within a year from october.
That may not be possible. Most mortgages limit the amount of overpayment you can make, you need to check. I think ours is limited to 25% overpayment annually.
whats our best option do you think oh wise ones?
Think about having an alternative of having that £8k in savings elsewhere, which you can use to offset your outstanding mortgage value.
If you shop around you can find deals at BOE-0.5%
The advantage to this is you have access to cheap funds in case you need them
Also id be asking questions of your broker, as you can get a 2 year fix via HSBC for BOE+0.34% at the moment
Also id be asking questions of your broker, as you can get a 2 year fix via HSBC for BOE+0.34% at the moment
That "might" be worse though given the op wants to clear the mortgage in 17 months.
(FWIW, in the OP's position I'd not be over paying at this point, take the cheapest fix I can get and stick the money in savings until the end of the fix because, personally, the liquidity would be of now value than the few '00 max in interest.
What are administration costs these days for a new mortgage? Last time we had to pay £1k. That's a whopping waste of money on an £8k mortgage
What are administration costs these days for a new mortgage?
Apparently £99.00 which sounds like a stonking improvement on the fees last time I fixed
Last time we had to pay £1k
Ditto
With an interest free credit card and 2 paypal accounts you can access the full amount in one go and no fees
And here's me thinking I am nearly there with my mortgage - just another 11 years and £150k to go 😐
Bastard
Might be cheaper to pay the SVR on your current deal for 2 years as although more expensive per se, you will save £99 from day one, which will take a bit of interest rate difference to cover when we are essentially talking about such low rates.
Also to note if you could pay it off completely now somehow, when we paid off our mortgage and rang the home insurers to update, our insurance went down so we got a refund. Something else to consider on your calculations.
as the bank still technically owns the house
The bank never owns the house. The borrower does. The bank just has their loan guaranteed by security over the house - basically nothing more than first dibs on asking the court to have the house sold if you default. And even then the bank is only allowed to get paid the amount of the loan (+ expenses + interest etc) out of the sale proceeds - it's still your property so you still get paid out whatever is left over.
OP I would suggest not fannying around with credit cards etc unless you're very organised. One late payment and you can lose the promo rate or get charged a fee that blows the whole purpose out of the water.
One late payment and you can lose the promo rate
That is very true, but he is clearly quite cash rich, so it would be very easy to set up a DD to cover the minimum payment to avoid any fees.
my smaller mortgage ends in 2 weeks, i took out a cc money transfer from Barclaycard 2.7% fee 0% till aug24 a couple of months back, so will pay it off,
[the current offer rate on the barclaycard app is 0% till jan25 3.3% fee.]
the mortgage SVR is 6.99%, 2 year fix is circa 4.84% [no fee] down to 4.29% on 5 year.
majoirty of rats want a £999 booking fee
kind of wish i'd taken the 5 year fix on my larger mortgage for an additional 0.05% over the 2 year fix i took out last January :0(
ps. if you go the CC route remember if you tend to pay down the card over the month, it'll reduce the fee free balance , but you'll still need to pay off all purchases in the month in full..
I'd forgotten how cards work, so spent £500 in the month paid it off, then statement came and i'd reduced my balance and then had to find another £500 to pay down the statement spend to avoid incurring charges (plank ..)
I'm in a similar-ish position - 2 years left on the term when this fixed deal expires in September and it's tempting to just pay it off rather than remortgaging. I do have the cash to cover it but it would leave me with a fairly slim emergency fund. The killer for me is the fees for remortgaging - the fee free/low fee deals have higher rates and I'm not sure I can be bothered paying a fee for the ability to have a slightly bigger emergency fund when it will build up again fairly quickly once I'm no longer paying £1k per month on the mortgage. Taking out a 0% on purchases credit card which I can use in that period if necessary is probably all I need to cover the gap.
’m in a similar-ish position – 2 years left on the term when this fixed deal expires in September and it’s tempting to just pay it off rather than remortgaging. I do have the cash to cover it but it would leave me with a fairly slim emergency fund
Honestly I'd get it paid off if I were you. Granted you'll have a lower emergency fund but your outgoings will be less too so you'll be able to save that money up pretty quickly. I viewed the interest savings on the overpayments I made against the return on a cash deposit. No brainer when you look at the Net interest on savings and gross interest on the mortgage. I'm just about to take a 5 year fix on 4.1% at the end of which I will hopefully be able to pay everything off.
For the OP
might a personal loan still be cheaper?
Almost certainly not, the days of cheap money are over and overall that is probably a good thing even if it is painful right now. Also you won't get too much better over 2 years than that tracker.
That may not be possible. Most mortgages limit the amount of overpayment you can make, you need to check. I think ours is limited to 25% overpayment annually.
rang her to check, apparently as its a tracker we can overpay whenever/whatever we want. ill check the small print tho.
Also id be asking questions of your broker, as you can get a 2 year fix via HSBC for BOE+0.34% at the moment
maybe that comes with a larger set-up fee, especially as a new lender? im hoping that using barclays again will make it a bit easier for all the checks/faff too. wife has been having a look at a few too and there are many that dont allow more than 10% overpayment, whether this is one of those or not i dont know.
(FWIW, in the OP’s position I’d not be over paying at this point, take the cheapest fix I can get and stick the money in savings until the end of the fix because, personally, the liquidity would be of now value than the few ’00 max in interest.
wife suggested that last night actually, letting it ride for the 2 years, have more money in our pockets, although knowing us we'd probably spend it on holidays rather than savings.
i think we're pretty much settled on the brokers suggestion then, whether we overpay for 1 year or let it ride for 2.
thanks all for your help and advice, much appreciated.