should I buy myself out of my current deal?

26 Oct 2022

should I buy myself out of my current deal if I have over 6 months left on my current fixed rate by paying early repayment charges?

 

Just lately, this is one of the most common questions that we’re receiving from our clients. We appreciate it’s difficult to know what to do for the best at the moment… As much as we’d love to, we can’t predict what will happen to interest rates, so it is difficult to advise on this.

 

But one option could be to make over payments instead. Overpaying is usually available on most mortgages, although, it’s worth noting, this could be restricted to 10% of the current outstanding balance within a 12-month period. By overpaying, you’ll reduce the capital on your mortgage as you don’t pay interest on the amount you overpay. So, what will this mean? When you’re able to re-mortgage your current deal, even though the rates could still be significantly higher, your balance will have decreased at a greater rate, and the impact of the rate rise could be reduced.

 

If your mortgage rate is higher than the after-tax rate you earn on savings interest, then you’ll be better off overpaying your mortgage. With mortgage rates rising faster than savings, it’s likely to be the case for more and more people. 

 

What to consider? If you feel like this sounds like the right option for you, it’s important to check with your lender to ensure any overpayments will reduce your mortgage debt and shorten the term, rather than reduce your monthly payments. Don’t forget, you can stop your over payments at any point, if you need to. Before you make the decision, here’s a few other things that we recommend you to consider:

 

Do you have other more expensive debts? Are there any early repayment charges? Do you have sufficient emergency fund?Our best advice right now would be to speak to one of our Mortgage Advisers, who will look in to your personal circumstances and tailor the advice they give you. We’re here and waiting to help you!

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