Hi,

We purchased a terraced house in Sep 2007 for 198000 and took out an offset mortgage with Coventry at 5.99% for 150000. The mortgage is fixed for 5 years and there is an early repayment charge of 4%.

As of Jan 2009, we have managed to reduce the mortgage balance to 115000 by making extra payments. Looking at what has happened with interest rates in the last 6 months and likely future drops - we are now thinking of remortgaging at a fixed rate of around 3-3.5% for the next 2 years. This means we will have to pay 4% to Coventry to get out of our current mortgage. I think that amount will offset in interest charged in the next 1 year.

With the mortgage balance roughly around 60% of the property value (taking in to account recent property price falls) - we should be able to get a good fixed rate mortgage.

Is this is a good idea?

thanks

Hi,

I have had a look at rates available and done some quick calculations, and I'm not sure this would actually be worthwhile.

Firstly, the value of your property may well have fallen over the last year or so. And if we look at the value having dropped to 190k, you would be just over 60% loan to value(ltv), so the 60%LTV mortgage products would probably not be available to you.

Also, you may be intending to add the £4,600 early redemption charge(ERC) to your new mortgage, which would move you even further from 60%ltv mark.

However, if we assume you have cash for the ERC so won't need to add it to your mortgage, the best 2yr fixed rate available (_base_d on the info you have provided & baring in mind set up fees charged by the lender) is 4.49% with no fee (assuming you satisfy this particular lenders criteria)and on an interest only basis this will cost approx £430pm.

At 5.99% it will be approx £574 pm.

Thats a monthly saving of approx 144.

Over 24 months (2yrs) that is a saving of £3,456. Which is less than the charge by Coventry. So at first glance this does not seem worthwhile.

However, if you were to look at a 3yr deal, we could calculate the savings over a longer period and it may work out to be a profitable decision. It really depends what rates we can get. Also, if you can make a further reduction in the mortgage balance to ensure you are below 60%ltv, better products will be available, again making it possible tyhat a move would be beneficial.

The best advice is to contact an independent mortgage broker and chat through all of the details to see what the best products are for your circumstances and if it can be worthwhile.

Should you want a chat, you are welcome to contact me on 01208 816667.

Hope that is somewhat helpful.

Dan