I currently have 2 years remaining on my current repayment mortgage deal. The balance stands at £50,000 give or take, and the current rate is 6%. At present I am overpaying very slightly with monthly payments of £401, basically match the payments on my previous rate. There is an early payment charge of 3% up to the deal end in July 2011.

Am I basically correct in thinking there is little mileage in changing until the deal ends? Early repayment stands at about £1500 and a set-up fee of between £500 and £1000 would doubtless be applicable to most other products. Given current rates will make monthly payments in the region of £350, the 2 years of reduced payments don't pay-back the fees.

Or is there a longer term view? If I maintain payments at £400, and add the fees to the loan, do I see a benefit over the 2 years through a reduced final term?

Sorry for the ramble, and thanks for any advice.

Hi there,

You are correct in your view that the lower payments will not justify the fees involved.

Imagine it like this, a 3% erc, lets say you go for a 2 yr deal, that deal needs to save you 1.5% per year just to cover the 3% erc (crude example, but makes the point).

The final question is an interesting one and you would need to do a calculation of total cost for both options. Also remember that if you add the fees to the mortgage you will be paying interest on them as well.

Essentially, there will be a point where if the new rate is low enough, it would be worth your while switching, however I very much doubt you will find a rate low enough to justify all of the fees.

If you want a more detailed chat, contact an indepepndent mortgage broker.