When to start looking at remortgaging?

FrustrationFull · 11 September 2017 at 8:53AM

We bought our first house in January 2016 on a 2 year fixed rate with Skipton and have been overpaying what we can since so i am confident we will hit the 85% LTV figure by the time January comes around. We were wondering when we should start the ball rolling on a remortgage to try and fix the rate?
When we bought the house we naively used the estate agents broker and paid the lifetime fee, so having paid that it makes sense to use them.
I have been looking at 5 year fixes for an idea of where we stand (does this seem sensible with Brexit looming?) and the lowest i can see on the money saving expert comparison is with Leeds which would give us a rate of 2.04% and drop our monthly payments by around £50, although we would keep the payments the same which would see us overpaying by around £150 per month.
If we dont manage to hit the 85% figure will we be stuck on the 90% rates?

Last question, and possibly a naive one, but if we fix our mortgage for 5 years and want to sell in that time would that cause a problem? We certainly arent in a rush to move but if the situation arises where we need a bigger house would it impact us massively or stop us being able to move?

VentureMM · 11 September 2017 at 12:21PM

Hi there,
Firstly congratulations on getting your first property, it certainly isnt an easy feet in 2017. If your fixed rate is up in January, then now is definitely the time to start looking at your remortgage options as it will take some time to complete. A lot of people are pressured in to using big estate agents for their mortgage advise. It a very immoral business practise, by chance did you see Fox and sons? They are renowned for this behaviour.

The length of the term really depends on what you value more, I often recommend 2 years as they provide the best rates, but also give you more freedom if you want to move, as well as potentially allowing you to move on to a better rate in 2 years time, as you will have reduced the Loan to Value on the property, much like you are already trying to do with your overpayments. If you go for a 5 year term, you would not be able to move or remortgage on to another, potential better rate, for those 5 years unless you pay a large Early Repayment Charge for leaving (usually a few thousand pounds).
However if you are concerned over what will happen to rates over the brexit process, then you can lock in the current low rates for that longer period to provide security. So again, its down to whether you value having the lowest rate possible with the flexibility to change in a few years, or if you want the security of keeping the low rate for a longer term.

Inae · 11 September 2017 at 3:34PM

@VentureMM: I have never met a broker who recommends long term fix rates, most love the 2-yr ones... why would they recommend 5-yr or 10-yr, they'd get less frequent business from customers

kingstreet · 11 September 2017 at 5:05PM

Inae wrote: »

@VentureMM: I have never met a broker who recommends long term fix rates, most love the 2-yr ones... why would they recommend 5-yr or 10-yr, they'd get less frequent business from customers

Do us a favour and deal with this then;-

Last question, and possibly a naive one, but if we fix our mortgage for 5 years and want to sell in that time would that cause a problem? We certainly arent in a rush to move but if the situation arises where we need a bigger house would it impact us massively or stop us being able to move?

Cheers.

juniordoc · 11 September 2017 at 5:11PM

We just got a really good deal on a 3 year fix, 1.56%. It might give you the best of both worlds? We were worried about a 2 year fix as it's very close to the end of brexit negotiations and are hoping for smoother times in 2021!

juniordoc · 11 September 2017 at 5:21PM

In some related questions to the OP's...

When you remortgage, does your property get revalued, allowing you to reach a better LTV assuming it has gone up in value?
Does this happen regardless of whether you change mortgage lender or stay with the original one?
If your mortage rate is less than the rate you can get from a high interest current account, might it be better not to overpay, and to instead be earning 3-5% interest on it?

kingstreet · 11 September 2017 at 5:23PM

You have to 'remortgage' to a new lender. Otherwise there is no change to the mortgage deed. A customer retention product from your existing lender isn't a remortgage.

In the latter case, you would need to establish your lender's approach to the property value.

You need to compare the cost of various financial options and work out which suits you best.

Inae · 11 September 2017 at 9:48PM

kingstreet wrote: »

Do us a favour and deal with this then;-

Cheers.

OP's question re: moving was more like hypothetical?! Their concern seems to be more LTV and Brexit related.

Anyone who uses a broker needs to understand their bias/interest as well - it's normal, brokers run (or work for) a business that needs new and repeat customers. I'm not saying two-year rates are wrong. I'm on two-year fix rate myself. I need the flexibility atm and it helps that it comes at a lower interest rate.

That was just my personal observation, most brokers - even here on mse - tend to put more effort into making the case for the shorter fix deals.

When to start looking at remortgaging?

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