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  • FIRST POST
    • stolt
    • By stolt 13th Jun 17, 9:49 AM
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    stolt
    mortgage query, new fix for 5 yrs will low LTV
    • #1
    • 13th Jun 17, 9:49 AM
    mortgage query, new fix for 5 yrs will low LTV 13th Jun 17 at 9:49 AM
    hi all im looking for some help i think ive spen the last two weeks looking at mortagges and best buys and tbh its all muddled up in my head now.


    I currently have 90k outstanding on mortgage with 13% LTV ratio on the house. My mother in law is giving us 40k over installments over the next year which we will pay into our mortgage.


    At the moment im with santander and we had a interest only mortage fixed for 5 years but fix rate ended about 2 years ago and ive stayed on their low SVR rate which ive been then overpaying by £800 a month to get the mortgage down to the level it is at now.




    My plan is to try to pay the mortgage off in 5 years or get it to under 20k.






    First direct do some interesting mortgages but i need some help with my some sums


    ive based my mortgage on 90k and i did the term over 20 years even though i plan to pay it off in 5.


    they have a 1.74% with £1450 fees - monthly payment £453


    and they have a 1.94% with no fees - monthly payment £451


    on these mortgages there is no limit to the overpayments and you can pay in large lump sums so when we get the mother in laws money in then the mortgage will reduce further.


    im 43 yrs old and just wondered is it a good thing to have at least a small mortgage for credit etc if needed


    thankyou
    Last edited by stolt; 13-06-2017 at 3:04 PM.
    Listen to what people say, but watch what people what people do!!
Page 1
    • getmore4less
    • By getmore4less 13th Jun 17, 11:38 AM
    • 30,334 Posts
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    getmore4less
    • #2
    • 13th Jun 17, 11:38 AM
    • #2
    • 13th Jun 17, 11:38 AM
    That looks wrong lower rate with no fee!

    What's your current SVR.
    • getmore4less
    • By getmore4less 13th Jun 17, 11:43 AM
    • 30,334 Posts
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    getmore4less
    • #3
    • 13th Jun 17, 11:43 AM
    • #3
    • 13th Jun 17, 11:43 AM
    I will do some numbers later but gut says get a 2y fix on a lower rate.(with unlimited overpayment)

    And no fee will be better in most cases.
    • stolt
    • By stolt 13th Jun 17, 3:07 PM
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    stolt
    • #4
    • 13th Jun 17, 3:07 PM
    • #4
    • 13th Jun 17, 3:07 PM
    I will do some numbers later but gut says get a 2y fix on a lower rate.(with unlimited overpayment)

    And no fee will be better in most cases.
    Originally posted by getmore4less



    thanks, yes you were quite right i had the rate wrong way around int he examples, now correct.


    The thing with the 2 yr deals is my concern over the rates risiing and i wont be able to pay the mortgage off in 2 years


    i have looked at first direct for 2 yr fixed and they have


    1.59% no fee - monthly payments £438


    and a
    1.14% with £1450 fees - monthly payments £420


    i guess the bigquestion is rates in two years time and where it would be, i guess even two years cant possibly see a massve rate increase
    Listen to what people say, but watch what people what people do!!
    • SuboJvR
    • By SuboJvR 13th Jun 17, 3:26 PM
    • 445 Posts
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    SuboJvR
    • #5
    • 13th Jun 17, 3:26 PM
    • #5
    • 13th Jun 17, 3:26 PM
    thanks, yes you were quite right i had the rate wrong way around int he examples, now correct.


    The thing with the 2 yr deals is my concern over the rates risiing and i wont be able to pay the mortgage off in 2 years


    i have looked at first direct for 2 yr fixed and they have


    1.59% no fee - monthly payments £438


    and a
    1.14% with £1450 fees - monthly payments £420


    i guess the bigquestion is rates in two years time and where it would be, i guess even two years cant possibly see a massve rate increase
    Originally posted by stolt
    With those two you are better off with the no fee over that term I believe?

    £1450 fee/24 months = £60.41. The monthly payment is only £18 less on the fee paying deal.

    With the 1.14% offer you pay a total of £11,530 over two years including the fee. With the no fee rate 1.59% it's £10,512 over two years.
    • ACG
    • By ACG 13th Jun 17, 3:55 PM
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    ACG
    • #6
    • 13th Jun 17, 3:55 PM
    • #6
    • 13th Jun 17, 3:55 PM
    On a Mortgage of £90k, it is usually better to take out a mortgage with no fees, but it is always important to do the sums.

    If you are planning on overpaying, most lenders limit you to around 10%, so it might be worth considering the lenders based on the overpayment facility OR find a lender that will pay you a higher rate than the Mortgage is (after tax) and putting the money in a savings account instead.

    Plenty to weigh up.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • stolt
    • By stolt 13th Jun 17, 8:58 PM
    • 2,793 Posts
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    stolt
    • #7
    • 13th Jun 17, 8:58 PM
    • #7
    • 13th Jun 17, 8:58 PM
    thanks, didnt realise about 90K and choosing no fees but it make sense.

    first direct who i was looking at will let you overpay with no limits.

    its just the 2 year thing really i just thought about 5yr fix,. i guess i just have to do the sums to have look betwen the two deals, 2 and 5 yr
    Listen to what people say, but watch what people what people do!!
    • getmore4less
    • By getmore4less 13th Jun 17, 9:24 PM
    • 30,334 Posts
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    getmore4less
    • #8
    • 13th Jun 17, 9:24 PM
    • #8
    • 13th Jun 17, 9:24 PM
    The key with the 2 years is your mortgage will be tiny by then as you have the £40k coming and your own cashflow.

    how much are you planning to put into this yourself every months?
    Any idea on the timescales of the £40k?

    I will do the numbers but it will be tomorrow,
    • getmore4less
    • By getmore4less 13th Jun 17, 9:34 PM
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    getmore4less
    • #9
    • 13th Jun 17, 9:34 PM
    • #9
    • 13th Jun 17, 9:34 PM
    With those two you are better off with the no fee over that term I believe?

    £1450 fee/24 months = £60.41. The monthly payment is only £18 less on the fee paying deal.

    With the 1.14% offer you pay a total of £11,530 over two years including the fee. With the no fee rate 1.59% it's £10,512 over two years.
    Originally posted by SuboJvR
    you cant use the payment to compare mortgages.

    the max you can save on the lower rate is if you are interest only.

    2*£90,000*(0.0159-0.114) = £810

    repayment will be lower and massive overpayment even lower.
    • stolt
    • By stolt 13th Jun 17, 11:05 PM
    • 2,793 Posts
    • 1,206 Thanks
    stolt
    The key with the 2 years is your mortgage will be tiny by then as you have the £40k coming and your own cashflow.

    how much are you planning to put into this yourself every months?
    Any idea on the timescales of the £40k?

    I will do the numbers but it will be tomorrow,
    Originally posted by getmore4less
    I reckon we would get the 40K within a year probably much sooner.
    I plan on overpaying by gbp450 a month

    I also have another option to throw in the mix

    i have about 35K which is across my childrens accounts and premimum bonds for the kids so i can use all that and then once the mortgage is low or paid off i can pay back into their accounts, their accounts earn hardly anything in interest anyway.

    so i could put 35k in before getting the mortage and then feed my mother in laws money now.
    Listen to what people say, but watch what people what people do!!
    • getmore4less
    • By getmore4less 14th Jun 17, 8:04 AM
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    getmore4less
    OK got the time to do some numbers

    summary/assumptions.

    £90k outstanding. (target 5 years.)
    £40k gift on its way within a year
    £35k might be available.
    £900pm amount available for regular payment

    For illustration we will use the FD rates
    2y 1.59%
    5y 1.94%

    ok lets go with the starting example a 5y fix with £900pm
    in 5 years
    £90,000 @ 1.94% £900pm £42,500 interest £6502

    That give you the max you can save by optimizing over 5 years as £6500

    lets add £40k at end year 1.
    1year
    £90,000 @ 1.94% £900pm £80,865 £1,665
    y2-y5
    £40,865 @ 1.94% £900pm £0 £1,612 ( total £3,277)

    That is your 5 year plan sorted with a saving of £3200 over the base option. there is some wiggle room there as the last payment is only £200 and if the £40k comes in quicker than a year that saves a bit more.

    On that 5y fix with £40k at end of year 1 at the 2 year point you will owe £30,768 ( total interest so far £1665+£704=£2,365)

    if you took the 2y fix we have

    £90,000 @ 1.59% £900pm £80,563 interest £1,363
    £40,563 @ 1.59% £900pm £30,334 interest £571. (total £1,934)

    To break even over the next 3 years you need a rate better than 2.9%

    lets say the best case it rates don't move then you have for 3 years
    £30,334 @ 1.59% £900pm £0 interest £719

    total interest is then £2653 a saving of £624 over the 5y option.

    now that may be a price worth paying if you think over 2 years rates may go up more than about 1.5%.

    Now lets look at a slightly different plan and use the £35k on the 2y fix.
    Y1
    £55,000 @ 1.59% £900pm £45,002 interest £802
    Y2
    £5,002 @ 1.59% £420pm £0 interest £43. (total £845)
    (lower payment to avoid finishing off before the 2 years are up)

    Savings back up to £5,760 at Y2 with 3 years @ £900 to go £32,400

    Depending on the timings of the 40k there will be adjustments but that is probably about as good as it gets. and should get that £6500 interest down under £1k.
    .................................................. .....................
    If not 100% happy using the kids money I have another option that protects that in that you can get it back at any time.

    if you qualify for the offsets, FD do a no fee 2y fix offset @ 2.14%

    you start with £90k then offset their £35k to £40k goes in as and when it arrives you can offset the full £900pm

    in the first 2 years this will cost

    Y1
    £55,000 @ 2.14% £900pm £45,282 interest £1082
    Y2
    £5,282 @ 2.14% £900pm £0 interest £33. (total £1115)

    100% offset in 6 months

    costs about 300 more for the safety net of access to the money.

    you take the deal over a longer term and the cash is there to get back if needed.

    once 100% offset the cost is zero.

    You could also use Stoozing where you use a 0%(no fees) CC like a purchase deal to offset even more money and get to 100% offset even quicker.

    Saving that last £1k will take a bit of extra work over a simple solution.


    The 5y plan hinges on the £40k and the £900pm

    if you say only had £800pm then the initial 5y fix with £40k at Y1 becomes.

    1year
    £90,000 @ 1.94% £800pm £82,076 £1,676
    y2-y5
    £42,076 @ 1.94% £800pm £5,573 £1,897 ( total £3,573)
    Last edited by getmore4less; 14-06-2017 at 8:07 AM.
    • stolt
    • By stolt 14th Jun 17, 2:09 PM
    • 2,793 Posts
    • 1,206 Thanks
    stolt
    thankyou so much for going to all that trouble for me, really appreciate that. I liek the idea of the offset you have mentioned there but i think looking at those sums the 2 yr fixed is probably the best option for me. i have no idea on what the rates are going to do if someone was to ask me i must bet one way or another i would say that the rates will be higher than they are now but i based that on very little knowledge or experience other than they have been extremely low for so long but i dont think it would be as high as 2.9% . But as you say £625 for 5 yrs peace of mind so i think i wll run over this with my wife, looking at just over £100 a year for that security and i guess theres a lot of people out there that would pay that for certinity.
    I think i'll use the kids money and bring that down i dont have to do it straight away but makes sense that before i take the mortgage out i reduce the debt even further for the new mortgage company
    Listen to what people say, but watch what people what people do!!
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