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    • italianie
    • By italianie 19th Apr 17, 11:00 AM
    • 33Posts
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    italianie
    Remortgaging - Two options, but which to choose?
    • #1
    • 19th Apr 17, 11:00 AM
    Remortgaging - Two options, but which to choose? 19th Apr 17 at 11:00 AM
    I'm ready to move away from my One Account 4% Current Account Mortgage, but need a bit of a push to help me make my mind up on which option to go with.

    I'm looking to fix for 5 or 10 years and make over payments with any disposeable income I have left at the end of the month. I have a mortgage of 44,000 left to pay, and I tick the boxes to get the better 60% LTV rates.

    My somewhat optimistic plan with remortgaging, is to pay the balance off over 5 years, whilst switching to a competative rate of interest over what I currently, the ultimate goal of being mortgage free in my early 40's!! However, in terms of affordability I've realised that would be squeezing things, so I'm now looking at taking the mortgage over a longer term of either 7 years or 10 years, but with the option of overpayments to make my original target within reach. If I do have the extra funds spare each month, I can simply pay off more to try and achieve the 5 year goal, but nice to know if I don't find the spare funds I just pay it over the original term.

    I've narrowed down my choice to just two products, the First Direct 5 Year Fixed Fee Saver 1.94% with no fees and First Direct 10 Year Fixed Fee Saver 2.49% also with no fees. Both mortgages allow £15000 worth of yearly over payments, which is more then enough buffer for me to pay extra each year.

    My options are:

    Option 1 - First Direct 5 Year Fixed 1.94% Fee Saver.


    I would take a 7 year total term on the 5 year fix 1.94% rate. This gives a £561 Monthly Payment, Interest is £3095 across the term without taking any overpayments into consideration. Then I try and overpay to get it closer to bring the term down to 5 years.

    Pro's
    - It's shorter term and I could be mortgage free earlier. Can make top up the overpayments to reduce the term closer to my 5 year goal. Will pay significantly less interest then with the 10 year fixed.

    Con's - Higher Montly Payment means less disposable income and monthly financial flexiblity, it's in the safe zone of affordability with current pay but probably means staying put job wise. I would have less flexibility to move job (I might decide to move). Also if the interest rate goes up when the fixed term is over in 5 years, and I haven't managed to overpay, I could end up paying more then on the 2.49% option.

    Option 2 - First Direct 10 Fixed 2.49% Fee Saver

    I take a longer 10 year term on their 10 year fix at 2.49%. £415 Monthly Payment, Interest is £5754 across the term without taking overpayments into consideration. I still try and overpay as much as possible to bring the goal closer to 5 years.

    Pro's - Lower monthly payment, more disposable income each month, more montly financial flexibility. Fixed rate for 10 years, meaning total security against interest rates hikes and 2.49% is still low compared to previous years. I can still make over payments and reduce the term and interest paid. More flexibility to move employment if I want to make a side ways move and take a pay cut and gain job satisfaction, peace of mind, less stress.

    Con's - More interest over the term, well by approx .5%. Longer term means I still have a mortgage to pay for up to 10 years which is longer then I had in mind, unless I make the overpayments.

    So its only £146 difference between the two on a monthly basis, might not sound significant, but factoring other bills, it feels like a nice buffer to fall back on.

    So in summary it comes down to this:

    Do I take short term pain and push myself to achieve being mortgage free early (5 to 7 Year) but live a little tighter for the next 5 years. Alternatively should I go the 10 year longer route, giving me additional security, flexibility and disposable income.

    I guess the final compromise might be taking the slightly better 5 year fixed rate but starting the term at 10 years and leaving it to chance on whether I can overpay, but don't like the idea of interest rate being left to chance in 5 years time.

    Am I overlooking the potential of overpayments ?

    If I go the 10 year fixed route and find I have money spare at the end of the month (this is quite normal for me), then I can no doubt wittle the term and interest down anyway. This might make the difference of the interest paid between 1.94% and 2.49% insignificant, especially if I start throwing larger monthly amounts at the outstanding balance. So perhaps it's a no brainer to go the 10 year fixed for peace of mind and knowing I can achieve similar with minimal difference in interest paid.

    I know I should probably seek a financial advisors opinion, but if anyone can help me make up my mind, then I'd welcome your advice.
    Last edited by italianie; 19-04-2017 at 1:41 PM.
Page 1
    • italianie
    • By italianie 20th Apr 17, 10:20 PM
    • 33 Posts
    • 5 Thanks
    italianie
    • #2
    • 20th Apr 17, 10:20 PM
    • #2
    • 20th Apr 17, 10:20 PM
    Guess my post might be a bit long to digest LOL
    • getmore4less
    • By getmore4less 20th Apr 17, 11:34 PM
    • 29,803 Posts
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    getmore4less
    • #3
    • 20th Apr 17, 11:34 PM
    • #3
    • 20th Apr 17, 11:34 PM
    if your target is 5 years.

    Do the 5y fix over 10y(£404pm) the overpay the limits are withing the 5y(£770) target payment.
    if you hit a ERC limit set up monthly saver(s) for the surplus

    once set up the term is mostly irrelevant it is what you pay that matters.


    in 5 years time on the 5y fix over 10 years at £404pm even if you don't overpay you will only have £23k left rate is much less of an issue on the smaller amounts.

    pay £415 min and you are left with £22,350, on the 10y fix you would have £22,340 £1k more.

    on £22,350 over 5y with a £415 payment you can take a rate of 4.34 a rise of 2.4% over current 5y fix.
    • italianie
    • By italianie 21st Apr 17, 7:39 PM
    • 33 Posts
    • 5 Thanks
    italianie
    • #4
    • 21st Apr 17, 7:39 PM
    • #4
    • 21st Apr 17, 7:39 PM
    if your target is 5 years.

    Do the 5y fix over 10y(£404pm) the overpay the limits are withing the 5y(£770) target payment.
    if you hit a ERC limit set up monthly saver(s) for the surplus

    once set up the term is mostly irrelevant it is what you pay that matters.


    in 5 years time on the 5y fix over 10 years at £404pm even if you don't overpay you will only have £23k left rate is much less of an issue on the smaller amounts.

    pay £415 min and you are left with £22,350, on the 10y fix you would have £22,340 £1k more.

    on £22,350 over 5y with a £415 payment you can take a rate of 4.34 a rise of 2.4% over current 5y fix.
    Originally posted by getmore4less
    Your reply actually makes more sense to me, 5 year fix over 10 years at £404, I think that might be the best way to do it. Then I can over pay as you mention and see what's left if anything. I just need to decide if it's worth looking at that ATOM mortgage, the 1.29% 5 year fixed that is advertised but it has a £999 fee I think. I'm also not sure if it allows overpayments. Probably not much in it, when you take into account there is no fee with the First Direct 1.94% 5 year fixed.

    Last thing would there be any point at all staying with the One Account, or am I just going to pay more because of the 4%. I'm not sure if there'd be any difference with it being offset, as I know you pay the interest at the beginning with repayment mortgages, where as this wouldn't bet the case would it with my CAM?
    Last edited by italianie; 21-04-2017 at 7:42 PM.
    • GardenGirl77
    • By GardenGirl77 21st Apr 17, 11:16 PM
    • 23 Posts
    • 306 Thanks
    GardenGirl77
    • #5
    • 21st Apr 17, 11:16 PM
    • #5
    • 21st Apr 17, 11:16 PM
    Atom also do a 5 year fix at 1.64% with no fees, it's what we have just applied for. They do allow overpayments of 20%. I think the 1.29% rate has been withdrawn though.
    • italianie
    • By italianie 21st Apr 17, 11:35 PM
    • 33 Posts
    • 5 Thanks
    italianie
    • #6
    • 21st Apr 17, 11:35 PM
    • #6
    • 21st Apr 17, 11:35 PM
    Atom also do a 5 year fix at 1.64% with no fees, it's what we have just applied for. They do allow overpayments of 20%. I think the 1.29% rate has been withdrawn though.
    Originally posted by GardenGirl77
    Gosh that was quick, thought the 1.29% was only just released a few days back. The 1.64% sounds like a cracking deal. Is it right you have to apply through a broker, rather then directly through them. Is there an additional fee or commission to the broker for this?
    • getmore4less
    • By getmore4less 22nd Apr 17, 7:16 AM
    • 29,803 Posts
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    getmore4less
    • #7
    • 22nd Apr 17, 7:16 AM
    • #7
    • 22nd Apr 17, 7:16 AM
    Your reply actually makes more sense to me, 5 year fix over 10 years at £404, I think that might be the best way to do it. Then I can over pay as you mention and see what's left if anything. I just need to decide if it's worth looking at that ATOM mortgage, the 1.29% 5 year fixed that is advertised but it has a £999 fee I think. I'm also not sure if it allows overpayments. Probably not much in it, when you take into account there is no fee with the First Direct 1.94% 5 year fixed.

    Last thing would there be any point at all staying with the One Account, or am I just going to pay more because of the 4%. I'm not sure if there'd be any difference with it being offset, as I know you pay the interest at the beginning with repayment mortgages, where as this wouldn't bet the case would it with my CAM?
    Originally posted by italianie
    get that silly notion(nonsense) out of your head.

    How much you owe and the interest rate determine how much interest you pay.
    • getmore4less
    • By getmore4less 22nd Apr 17, 7:45 AM
    • 29,803 Posts
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    getmore4less
    • #8
    • 22nd Apr 17, 7:45 AM
    • #8
    • 22nd Apr 17, 7:45 AM
    if you want to find out more about the Atom products you need a broker but you can do some pre research using the intermediary site.

    the 1.64% over 10y would be £398pm

    £44k after 5y paying £415pm

    2.49% £23,340
    1.94% £22,353
    1.64% £21,827

    thats another £500 on top of the £1k with FD.
    • GardenGirl77
    • By GardenGirl77 22nd Apr 17, 8:14 AM
    • 23 Posts
    • 306 Thanks
    GardenGirl77
    • #9
    • 22nd Apr 17, 8:14 AM
    • #9
    • 22nd Apr 17, 8:14 AM
    Gosh that was quick, thought the 1.29% was only just released a few days back. The 1.64% sounds like a cracking deal. Is it right you have to apply through a broker, rather then directly through them. Is there an additional fee or commission to the broker for this?
    Apparently it's been popular! Yes you do have to go through a broker - I used London and Country who have been great, they keep you informed throughout. There are no extra fees to the 1.64 rate
    • italianie
    • By italianie 23rd Apr 17, 9:01 AM
    • 33 Posts
    • 5 Thanks
    italianie
    Well I've contacted a local broker about the Atom rates and I have indeed missed the boat. I've given him my figures though and he's going to have a look what else is out there. Shame the 1.64 would have been the sweet spot.
    • GardenGirl77
    • By GardenGirl77 23rd Apr 17, 4:51 PM
    • 23 Posts
    • 306 Thanks
    GardenGirl77
    That's such a shame, but the market seems competitive​ at the moment so hopefully more good deals will be available soon. Good luck!
    • italianie
    • By italianie 28th Apr 17, 8:25 AM
    • 33 Posts
    • 5 Thanks
    italianie
    In the end I went to two brokers and both told me the First Direct 1.94% feesaver for 5 years was better then they could offer and beats Atom's current rates for which I'd also have a broker fee of £300, so it seemed a no brainer to go with this option. I've taken the full term over 10 years, but still aim to pay it in 5 with overpayments and lump sum payment which are both unrestricted with the FD mortgage.

    So the application is now in with FD, it's all been agreed in principal, I've passed the credit and valuation checks, so providing all goes to plan, I should be switching in 4 to 6 weeks. I took the option of opening their FD Bank 1st Account which gives me £100 cash back, I don't think there's any benefit of continuing to use The RBS One Account as a bank account once the balance has cleared.

    The only doubt in my mind is :- could I have paid it quicker with sticking with the RBS One Account or would there have been any benefits to stick with it? I'm not sure exactly how the interest works with a CAM compared to the fix rate but I know you pay the interest on the current balance with a CAM, where as with a fixed rate the interest is paid on the full original balance for the mortgage life? Someone might be able to reassure me on this point, that I'm not loosing out? I also know with a fixed rate you pay off the interest mostly at the beginning of the term, but with the CAM it doesn't work like that.

    Anyway I'm hoping I've made the right choice as on pure interest rate basis, 1.94% with FD vs 4% with The One Account, seems a no brainer in terms of saving on the interest, and the fact I can make unlimited monthly overpayments and lump sum payments, seems to give the same flexiblity to pay the mortgage early that the One Account provides. My goal is to repay the full amount just after the fixed term comes to a close to avoid the early repayment penalty.

    Worst case scenario's would be, I either don't repay it in the fixed term and continue paying it for the full 10 year term I've taken, or I pay it earlier then the fixed term which incurs a 2% early repayment fee, but even then that is only £880 on £44000.
    Last edited by italianie; 28-04-2017 at 8:31 AM.
    • getmore4less
    • By getmore4less 28th Apr 17, 9:15 AM
    • 29,803 Posts
    • 17,818 Thanks
    getmore4less
    In the end I went to two brokers and both told me the First Direct 1.94% feesaver for 5 years was better then they could offer and beats Atom's current rates for which I'd also have a broker fee of £300, so it seemed a no brainer to go with this option. I've taken the full term over 10 years, but still aim to pay it in 5 with overpayments and lump sum payment which are both unrestricted with the FD mortgage.

    So the application is now in with FD, it's all been agreed in principal, I've passed the credit and valuation checks, so providing all goes to plan, I should be switching in 4 to 6 weeks. I took the option of opening their FD Bank 1st Account which gives me £100 cash back, I don't think there's any benefit of continuing to use The RBS One Account as a bank account once the balance has cleared.

    The only doubt in my mind is :- could I have paid it quicker with sticking with the RBS One Account or would there have been any benefits to stick with it? I'm not sure exactly how the interest works with a CAM compared to the fix rate but I know you pay the interest on the current balance with a CAM, where as with a fixed rate the interest is paid on the full original balance for the mortgage life? Someone might be able to reassure me on this point, that I'm not loosing out? I also know with a fixed rate you pay off the interest mostly at the beginning of the term, but with the CAM it doesn't work like that.

    Anyway I'm hoping I've made the right choice as on pure interest rate basis, 1.94% with FD vs 4% with The One Account, seems a no brainer in terms of saving on the interest, and the fact I can make unlimited monthly overpayments and lump sum payments, seems to give the same flexiblity to pay the mortgage early that the One Account provides. My goal is to repay the full amount just after the fixed term comes to a close to avoid the early repayment penalty.

    Worst case scenario's would be, I either don't repay it in the fixed term and continue paying it for the full 10 year term I've taken, or I pay it earlier then the fixed term which incurs a 2% early repayment fee, but even then that is only £880 on £44000.
    Originally posted by italianie
    Nonsense.

    where did you get this ridiculous idea from?

    even after being told in post 7(6 days ago) you still have this notion in your head.
    Last edited by getmore4less; 28-04-2017 at 9:18 AM.
    • tyllwyd
    • By tyllwyd 28th Apr 17, 11:16 AM
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    tyllwyd
    I think you might be getting confused because in the past some loans might have been frontloaded with interest (ie you paid off all the interest before you started paying capital) but I don't think that happens now.


    We used to have a Virgin One current account mortgage back in the day, and the advantage was that they treated your current account and mortgage lending as the same thing, so any money that would have been a positive balance in a separate current account, would reduce the overall borrowing on that day. Whether it's better than a traditional mortgage depends on the relative interest rates, and whether you are disciplined enough to make sure you don't fall into the trap of spending more than you earn, which is very easy to do with a current account mortgage.
    • getmore4less
    • By getmore4less 28th Apr 17, 11:54 AM
    • 29,803 Posts
    • 17,818 Thanks
    getmore4less
    I think you might be getting confused because in the past some loans might have been frontloaded with interest (ie you paid off all the interest before you started paying capital) but I don't think that happens now.


    We used to have a Virgin One current account mortgage back in the day, and the advantage was that they treated your current account and mortgage lending as the same thing, so any money that would have been a positive balance in a separate current account, would reduce the overall borrowing on that day. Whether it's better than a traditional mortgage depends on the relative interest rates, and whether you are disciplined enough to make sure you don't fall into the trap of spending more than you earn, which is very easy to do with a current account mortgage.
    Originally posted by tyllwyd
    That is the same as most offsets, they offset the current account.

    The reality is that for most people it makes a relatively small difference and is not enough on its own to over the interest rate margin.
    • italianie
    • By italianie 28th Apr 17, 12:09 PM
    • 33 Posts
    • 5 Thanks
    italianie
    Nonsense.

    where did you get this ridiculous idea from?

    even after being told in post 7(6 days ago) you still have this notion in your head.
    Originally posted by getmore4less
    I'm not sure to be honest, was reading up as much as I could online, but clearly getting myself confused, I'm not the best with this stuff as mentioned. I'll refer back to post 7.
    Last edited by italianie; 28-04-2017 at 12:16 PM.
    • italianie
    • By italianie 28th Apr 17, 12:11 PM
    • 33 Posts
    • 5 Thanks
    italianie
    That is the same as most offsets, they offset the current account.

    The reality is that for most people it makes a relatively small difference and is not enough on its own to over the interest rate margin.
    Originally posted by getmore4less
    Thanks thats reassuring.
    • italianie
    • By italianie 28th Apr 17, 12:14 PM
    • 33 Posts
    • 5 Thanks
    italianie
    I think you might be getting confused because in the past some loans might have been frontloaded with interest (ie you paid off all the interest before you started paying capital) but I don't think that happens now.


    We used to have a Virgin One current account mortgage back in the day, and the advantage was that they treated your current account and mortgage lending as the same thing, so any money that would have been a positive balance in a separate current account, would reduce the overall borrowing on that day. Whether it's better than a traditional mortgage depends on the relative interest rates, and whether you are disciplined enough to make sure you don't fall into the trap of spending more than you earn, which is very easy to do with a current account mortgage.
    Originally posted by tyllwyd
    I think your right, I'm probably getting confused with the front loading.
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