Should I let my fixed rate mortgage end without negotiating a new deal?
Q My three year fixed rate mortgage ends in early April 2023. At that time my mortgage balance will be £83,000. My husband and I have around £63,000 in accessible savings, so I'm wondering if it's worth letting the fixed rate term run out without negotiating a new deal. I think this would allow us to use all of our savings to pay off a large portion of the mortgage without penalty charges. We would then have around £20,000 on the mortgage on which we would be charged at the trailing rate of 5.5%. If we did this, in addition to avoiding a refund penalty, we would also avoid having to pay a fee to arrange a new fixed rate deal. In addition, the amount of interest paid per month would obviously be less since the overall debt would be much smaller. But I don't know if I'm being naive, and maybe making the decision to move to a follow rate without negotiating a new deal is risky. Did I miss a tip? It's worth noting that my husband and I are both self-employed, and that would wipe out our savings - but having such a small mortgage on our house in London would also be good peace of mind. GE
A Are you sure your lender's follow-up - or return - rate is still 5.5%? The reason I ask the question is that there has been a lot of movement in mortgage rates recently, so it might be worth double-checking before making a final decision.
The thing you're missing is that not all fixed rate mortgage deals charge you a fee for the sake of arranging them. For example, of the five two-year deals listed by Moneyfacts in its most recent mortgage picks, only one has a typical fee of £995. That way, you could agree to a much better rate than your lender's follow-up rate while avoiding arrangement fees.
I can see that reducing your mortgage at the lowest possible amount is an attractive option. However, I don't think wiping out your savings would necessarily give you peace of mind, especially if it didn't give you anything to fall back on if your self-employment earnings were to drop. Maybe a compromise is in order where you use some of your savings to reduce your mortgage debt, but keep as much as you need to tide you over in a difficult time.
Q My three year fixed rate mortgage ends in early April 2023. At that time my mortgage balance will be £83,000. My husband and I have around £63,000 in accessible savings, so I'm wondering if it's worth letting the fixed rate term run out without negotiating a new deal. I think this would allow us to use all of our savings to pay off a large portion of the mortgage without penalty charges. We would then have around £20,000 on the mortgage on which we would be charged at the trailing rate of 5.5%. If we did this, in addition to avoiding a refund penalty, we would also avoid having to pay a fee to arrange a new fixed rate deal. In addition, the amount of interest paid per month would obviously be less since the overall debt would be much smaller. But I don't know if I'm being naive, and maybe making the decision to move to a follow rate without negotiating a new deal is risky. Did I miss a tip? It's worth noting that my husband and I are both self-employed, and that would wipe out our savings - but having such a small mortgage on our house in London would also be good peace of mind. GE
A Are you sure your lender's follow-up - or return - rate is still 5.5%? The reason I ask the question is that there has been a lot of movement in mortgage rates recently, so it might be worth double-checking before making a final decision.
The thing you're missing is that not all fixed rate mortgage deals charge you a fee for the sake of arranging them. For example, of the five two-year deals listed by Moneyfacts in its most recent mortgage picks, only one has a typical fee of £995. That way, you could agree to a much better rate than your lender's follow-up rate while avoiding arrangement fees.
I can see that reducing your mortgage at the lowest possible amount is an attractive option. However, I don't think wiping out your savings would necessarily give you peace of mind, especially if it didn't give you anything to fall back on if your self-employment earnings were to drop. Maybe a compromise is in order where you use some of your savings to reduce your mortgage debt, but keep as much as you need to tide you over in a difficult time.
What's Your Reaction?
