Should I pay breakage costs?

Hi,
I have a 35 year 350,000 mortgage fixed at 5.15%. I have 20 payments left. My monthly repayments are 1800 less 295 interest relief.

I have breakage costs of 9300 + interets accrued of 4000. I have agreed with bank to add this to the mortgage balanace, so it would mean adding 13300 to my account.

I can then go on variable of 3.4% and this should drop again nexr week.

What would you do in this situation. Is it worth considering or total madness?

Thanks

How much of a saving would you make by breaking it?

About 250-300 per month

decbuck said:

About 250-300 per month

Click to expand...

300 X 20 months = 6K and your costs are 9300 so you switching makes no sense. Make sure you have the maths right. I assume that your TRS will also reduce if your repayments reduce. An apparant short term gain (lower current repayments) can in actual fact cost you in the long term.

At your current rate of 5.15%, you're paying €1502 per month in interest on €350k, excluding relief.

Add €13k to your principal, and at 3.4% variable, you'll be paying €1028 per month in interest..

So you'll save approx. €470 per month in interest.

Over the 20 payments left, that's €9400 saved in interest.

Doesn't look good, does it?

But don't fret. Because you'll be saving the guts of €500 a month in interest, you could increase your capital repayment by say €250 a month.
So you'll be saving €250 a month on what you're currently paying, and you'll be paying your principal off at an extra €250 per month.

I'd certainly change, but that's just me.

P.S. All the above is rough figures. You'd have to work out all your exact details yourself.

So this would reduce the term of my mortgage effectively?

If you pay off the extra €x per month, yes.

If you just pay what's owed, and pocket the savings every month, then your term will stay the same.

As an example, if you put the extra €250 per month against your principal, next year you'll owe €3000 less on your principal than you should.